Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Private Bills [Lords] (Standing Orders not previously inquired into complied with),—Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, That, in the case of the following Bill, originating in the Lords, and referred on the First Reading thereof, the Standing Orders not previously inquired into, which are applicable thereto, have been complied with, namely:—

Life Association of Scotland Bill [Lords].

Ordered, That the Bill be read a Second time.

Wear Navigation and Sunderland Dock (Finance) Bill,

As amended, considered;

Ordered, That Standing Orders 223 and 243 be suspended, and that the Bill be now read the Third time.— (The Chairman of Ways and Means. )

Bill accordingly read the Third time, and passed.

Edinburgh Boundaries Extension and Tramways Bill [Lords](by Order),

Consideration, as amended, deferred till Thursday, at a quarter-past Eight of the Clock.

Port of London Authority (Consolidation) Bill [Lords] (by Order),

Second Reading deferred till To-morrow.

Dundee Corporation Order Confirmation Bill,

Considered; to be read the Third time To-morrow.

Oral Answers to Questions — BRITISH ARMY.

DESERTION.

7. Mr. C. PALMER: asked the Secretary of State for War whether, in view of the fact that men who escaped arrest for desertion during the War have since received a certificate of protection, he will consider the justice of advising a general amnesty for all men now serving imprisonment for desertion during the War?

Sir A. WILLIAMSON (Parliamentary Secretary, War Office): It is not a fact that "men who escaped arrest for desertion during the War have since received a certificate of protection." In certain cases under the provisions of paragraphs 518 and 519 of the King's Regulations protecting certificates have been issued. In the case raised in the question by the hon. and gallant Member for Newcastle-under-Lyme, on the 29th June, the protecting certificate was issued. because the soldier concerned (a conscientious objector) was tried by court-martial in June, 1918, and sentenced to a year's imprisonment with hard labour. He appeared before the Central Tribunal, and was recommended for work under the Brace Committee, and in consequence was transferred to Section W of the Army Reserve. Shortly after the Armistice, he left the Home Office Centre without permission, and in consequence was formally recalled to the Colours in accordance with the scheme of the maintenance of discipline at the Home Office Centres, with which I think this House is familiar. He disregarded the recall and was subsequently declared a deserter, which of course technically he was.
In this particular case I think it will be agreed that no useful purpose would have been served by trying this man by court-martial and punishing him for the technical desertion which he committed, whereas as a matter of fact the real offence, if that be the proper expression, was leaving the Home Office Centre without permission at a time when he was not subject to military law, having previously been transferred to Section W of the Army Reserve. In regard to the latter part of the hon. Member's question, a
very liberal amnesty has already been extended to all prisoners, whatever may have been the nature of their offences, and for the latest information on this subject, I would refer the hon. Member to my reply to the hon. Member for Norwich, on 8th July.

Mr. PALMER: Will the right hon. Gentleman reply to the last part of my question as to a general amnesty?

The SECRETARY of STATE for WAR (Mr. Churchill): That is the question.

Mr. PALMER: I am asking the right hon. Gentleman to give me an answer. Will he grant a general amnesty to all men who are now serving reduced sentences for desertion?

Mr. CHURCHILL: No, Sir.

Mr. LAWSON: Is the right hon. Gentleman aware that there are very decent citizens who, for one thing and another, did desert after having served two or three years overseas during the War, and did not return to their units? They have come home and in some cases, in two cases within my own knowledge, have been marched through the streets under an escort. Does the right hon. Gentleman not think that this matter should be settled definitely one way or the other?

Mr. STANTON: They deserved it, too!

12. Mr. N. MACLEAN: asked the Secretary of State for War what is being done in the case of men who deserted from the Army about three years ago; and whether the War Office is still taking legal steps against those who so deserted?

Mr. CHURCHILL: If the hon. Member will refer to Section 161 of the Army Act, he will find that mutiny, desertion and fraudulent enlistment are offences which are excluded from the general limitation of three years which applies to other offences. Deserters, therefore, when they surrender or are apprehended must be disposed of in accordance with the Army Act and King's Regulations.

Mr. MACLEAN: In view of the fact that a small number of men deserted just at the time of the Armistice, does the right hon. Gentleman not think it would allay a great deal of unrest in the country if he gave instructions for the withdrawal of charges or of any action against such men?

Mr. CHURCHILL: I do not think the course we are taking is a harsh one. Whenever there are exceptional circumstances, such as in the case I referred to the other day, we shall give a protecting certificate.

Mr. KILEY: Is the right hon. Gentleman not prepared to take some action to reduce the very vindictive sentences now passed upon these men, in view of the fact that their wives and children are left absolutely destitute while the men are undergoing long terms of imprisonment?

Mr. CHURCHILL: If the hon. Member will give me any instance, I shall be glad to look into it. I have not heard of vindictive sentences being passed.

Mr. PALMER: In view of the fact that we need to get men for the new Army, would not a little leniency in this matter create a favourable public opinion?

Mr. CHURCHILL: I do not agree at all that we could afford to relax our punishment for the very grave offence of desertion. There is a great deal of desertion going on now, infinitely more than before the War. I cannot take any action which would seem to indicate that desertion from the Army on active service is not serious.

Mr. STANTON: May I ask the right hon. Gentleman whether he would be doing justice to those who died for their, country in being "easy" to those people who deserted for their own convenience? Will the right hon. Gentleman be good enough to do all he can to penalise these people, remembering the sacrifices of those who volunteered all they they had? Pandering to the Bolshies! [Laughter. ] Silly old Bolshies!

Mr. SPEAKER: If the hon. Member has any observations to make to his friends, would he kindly make them in the Lobby?

Mr. STANTON: I beg your pardon, Sir, but if a man happens to reply, would you apply the same ruling to one who gives a silly laugh like the hon. Member opposite?

Mr. SPEAKER: I cannot stop hon. Members from laughing.

Mr. STANTON: Very well; you will not stop me from speaking.

MILITARY POLICE.

9. Lieut.-Colonel W. GUINNESS: asked the Secretary of State for War whether he can state the number of assistant provost marshals, their clerks, and other personnel employed in the United Kingdom prior to the War and at the present time, respectively; whether the greater part of their work used formerly to be done by regimental police; and what is the additional cost involved by the present method?

Sir A. WILLIAMSON: The present numbers of provost officers and police personnel at Home, including clerks, are 1,205, all ranks, as against 412 before the War. These numbers have to find drafts for the overseas forces and are temporarily swollen owing to conditions in Ireland; they are in process of steady reduction as the Army gets back to normal conditions. As regards the second and third parts of the question, the line of demarcation between the work of the regimental and the military police has not yet been definitely settled.

Lieut.-Colonel GUINNESS: Is it possible to state what is the additional cost, as between the 1,200 and the 400?

Sir A. WILLIAMSON: I dare say it would be possible, and if the hon. Member desires it I shall get the information.

Lieut.-Colonel GUINNESS: Is it proposed to revert to the pre-War system and save this additional cost?

Sir A. WILLIAMSON: No; I think it it intended to reduce the number, as I have already stated in the answer.

GRETNA MUNITIONS FACTORY.

18. Mr. HAYDAY: asked the Secretary of State for War if he is aware that at the Gretna munitions factory an allowance of 5s. per week to workmen, known as temporary allowance or lodging allowance, was discontinued on 4th October, 1919; that the Gretna munitions tribunal decided that such stoppage of wages was contrary to the provisions of the Wages (Temporary Regulations) Act of 1918; that the appeal of the Ministry of Munitions to the High Court against this decision was dismissed by Mr. Justice Sands, at Edinburgh, on 11th May, 1920;
that the workmen have since been endeavouring to get the back money due to them without success; and if he will state the reason the money is being withheld?

Sir A. WILLIAMSON: This factory did not come under the control of the War Office until 1st June. As regards the first three parts of the question, I understand the position to have been substantially as stated in so far as the main body of workers (excluding agricultural workers) was concerned. As regards the fourth and fifth parts, arrangements for the payment of the arrears up to the end of March are in progress; but the question as to what part (if any) of the allowance the Department is called upon to continue to pay beyond that date, in view of general increases of wages granted in April and June, is under consideration.

ROYAL ARMY VETERINARY CORPS.

21, 22 and 23. Colonel Sir ARTHUR HOLBROOK: asked the Secretary of State for War (1) if any decision has yet been arrived at with regard to the conditions of half pay for officers in the Royal Army Veterinary Corps;
(2)what steps are being taken to reduce the surplus strength of major-generals in the Royal Army Veterinary Corps and whether he is aware that there are two such officers surplus to establishment whose retention is retarding the promotion of junior officers;
(3)if the two major-generals surplus to the Royal Army Veterinary Corps establishment are paid as and reckoned on the lists of colonels on the establishment of that corps; and, if so, why do they not receive similar treatment as regards the conditions of half-pay as other colonels on the establishment?

Sir A. WILLIAMSON: The two Major-Generals referred to by the hon. and gallant Member were promoted substantive Major-Generals for distinguished service. They are not surplus to to the establishment of the Royal Army Veterinary Corps, but are holding appointments as Colonels, which they would have filled if they had not been promoted. Their retention is not, therefore, retarding the promotion of junior officers. I do not understand what conditions of half-pay for officers of the
Royal Army Veterinary Corps the hon. and gallant Member refers to, but if he will let me have fuller details I shall be happy to look into the matter further.

SOLDIERS' GRAVES.

28. Mr. HOPKINS: asked the Secretary of State for War if he will say who is now responsible for the Connaught Cemetery, Thiepval, and its present neglected condition; and if he is aware of the muddle in the burial records in this cemetery which apparently renders it impossible to identify individual graves?

Mr. CHURCHILL: I am glad to be able to inform the hon. Member that this cemetery is now in perfect order. It is still under the Directorate of Graves Registration, but is ready for handing over to the Imperial War Graves' Commission. This cemetery has been one of the most difficult, the original portion having been badly shelled. It was also used for concentration. The most painstaking verification has therefore been necessary to ensure the records being in order.

29. Mr. HOPKINS: asked the Secretary of State for War if he is aware that the officers in charge of the graves' information at Albert are in complete ignorance of the meaning of the letters and figures used to mark the head crosses; and will he see that they are furnished with a key to the cypher?

Mr. CHURCHILL: I would refer the hon. Member to the reply to his question on this subject on the 7th July, in which he was informed that the source of all detailed information is Winchester House, St. James's Square. In this instance he is presumably referring to what are known as White Serial Crosses, appertaining to an emergency system adopted for the heavy casualties of the Somme battlefields. The key to these crosses is kept at Winchester House. Already the majority of those not originally allotted to "Unknowns" have been replaced by standard crosses and name-plates, and the work is still in progress. The hon. Member has, I think, been misinformed regarding the complete ignorance of the officers-in-charge. They may not possess the key, but they can certainly explain the meaning of the
system, or direct enquiries to any particular cross of which they have been given the number by Winchester House. Applicants are now informed from Winchester House of the serial number, in addition to the plot, row and number of the grave enquired for when a cross of this description is involved, in case the replacement has not yet been carried out.

Mr. HOPKINS: Is the right hon. Gentleman aware that I did inquire from the War Office and got an answer from Winchester House giving me the signs by which I might find the graves, but that they proved to be wrong, and that the local information officers were totally unable to explain the meaning of the signs given me by Winchester House and said they had no information which would enable them to identify them?

Mr. CHURCHILL: I very much regret it if that should have occurred. Everything will be done to avoid such unfortunate accidents, and if my hon. Friend will communicate with me privately, I will put him in touch with the Imperial War Graves Commission, and it will be a real service if he will tell his story to them and let me know whether or not he receives any satisfactory reply.

Mr. STANTON: Will the Imperial War Graves Commission be good enough to let us know where our sons are transferred after they have been buried in the front line, and then brought back to one of the cemeteries? Could we know when this change has been brought about? We do not know now.

Mr. CHURCHILL: Yes. The whole principles of administration of the Imperial War Graves Commission have often been discussed in this House. I am quite certain that my hon. Friend will have no difficulty in securing satisfactory treatment of any case like that, either for himself or for anyone for whom he inquires.

Mr. STANTON: I do not know where my son is.

Viscount WOLMER: Is the right hon. Gentleman aware that the answer he has given is incorrect, because in a great many cases—

Mr. SPEAKER: Will the hon. Member put his question down?

Oral Answers to Questions — RUSSIA.

BRITISH CASUALTIES.

10. Lieut.-Commander KENWORTHY: asked the Secretary of State for War what were the total casualties of officers and men, respectively, in North Russia between the date of the Armistice with Germany and the final evacuation; how many of the missing have since been reported

REGULAR ARMY AND TERRITORIAL FORCE, CANADIANS, AUSTRALIANS, AND ROYAL MARINE LIGHT INFANTRY.


Killed in action and Died of Wounds.
Wounded.
Missing.
Total.



Officers.
other ranks.
Officers.
Other ranks.
Officers.
Other ranks.
Other ranks.


31
147
44
361
14
81
89
589

Of the missing,13 officers and 66 other ranks have since been reported as prisoners. Of these 1 other ranks has died. The remainder have been released.

Total casualties in all parts of the former Russian Empire from date of Armistice with Germany until now—

REGULAR ARMY AND TERRITORIAL FORCE, CANADIANS, AUSTRALIANS, AND ROYAL MARINE LIGHT INFANTRY.


Killed in action and Died of wounds.
Wounded.
Missing(including prisoners.)
Total.


Officers.
Other ranks.
Officers.
Other ranks.
Officers.
Other ranks.
Officers.
Other ranks.


36
149
45
362
28
90
104
601

Lieut.-Commander KENWORTHY: Could not some of these brave men have been saved if the policy now in operation in regard to Russia had been followed then?

Mr. SPEAKER: The hon. Member must give notice of that question.

M. STROUVE.

11. Lieut.-Commander KENWORTHY: asked the Secretary of State for War whether official relations have been or will be established between the War Office and a Monsieur Strouve, styling himself Foreign Minister to General Baron Wrangel; and, if so, what is the object of these relations?

prisoners and how many of these have now been released; and what are the total British casualties in all parts of the former Russian Empire from the date of the Armistice with Germany until now?

Mr. CHURCHILL: The total casualties in North Russia from date of Armistice with Germany (11th November, 1918) to the final evacuation, are:

Mr. CHURCHILL: The answer to the first part of the question is in the negative, and the second part does not therefore arise.

Lieut.-Commander KENWORTHY: Is the hon. and gallant Member for Chelsea (Lieut.-Colonel Sir S. Hoare) assisting in this matter?

PRIVATE CLAIMS.

46. Mr. LEONARD LYLE: asked the Prime Minister whether, at the recent International Conference in Paris held to consider the position of private creditors of the Russian Government, it was stated that in the case of every country except Great Britain all private claims had been
not merely registered but examined and certified; and when, if this is so, the British Government intends to take similar action?

Mr. BONAR LAW (Leader of the House): I would refer my hon. Friend to the answer which I gave on the 1st July to a question by the hon. Member for Dartford, to which I have nothing to add, excepting that the whole question is at present under consideration.

BRITISH OPERATIONS, SIBERIA.

49. Colonel WEDGWOOD: asked the Prime Minister whether he will lay Papers in connection with the intervention and operations in Siberia from the date when our fleet entered Vladivostok in January, 1918, till the evacuation of the British military mission in this year?

Mr. BONAR LAW: As I stated yesterday in reply to a question by the hon. and gallant Member, the Government are considering whether Papers should be laid.

Oral Answers to Questions — TERRITORIAL ARMY.

KIT AND MESSING ALLOWANCES.

13. Major NALL: asked the Secretary of State for War whether kit-bags and a second suit of service dress will be issued to Territorial units attending training camp this year; and whether an allowance in aid of messing will be issued to officers commanding?

Sir A. WILLIAMSON: The answer to both parts of the hon. and gallant Member's question is in the affirmative. The cash messing allowance will be 1s. per day per man.

Lieut.-Colonel CROFT: Is the hon. Gentleman aware of the enormous increase in all contract prices for messing in camp, in some cases more than double the pre-War rate, and would he reconsider the question, in view of the change in the situation?

Sir A. WILLIAMSON: I cannot give an answer to that. The matter has been receiving very careful consideration, and no doubt a decision will be reached after consideration of all the points. If the hon. and gallant Member will come to the War Office about it, I shall be glad to see him.

HORSES (TRAINING).

14. Major NALL: asked the Secretary of State for War if he will expedite circulation to county associations of the exact terms and conditions relating to the provision of horses for training other than annual camp?

Sir A. WILLIAMSON: County Associations have been informed that they may assume that the grants in respect of the provisions of horses other than those for annual training will be at double the pre-War rate calculated on the new Peace Establishments of the Force. This will enable the Associations to proceed with their arrangements pending the re-assessment of the grants in detail.

RECRUITING.

15. Major NALL: asked the Secretary of State for War if he can state which Territorial Division shows the most satisfactory recruiting returns; how many Territorial units have recruited 90 per cent. of their establishment; and whether units with 75 per cent. strength will be fully equipped in time for this year's training?

Mr. CHURCHILL: The East Lancashire Territorial Division shows the best recruiting results. The returns at present received in the War Office are not rendered in sufficient detail to enable me to answer the second part of the hon. and gallant Member's question, but I understand there is one unit, at least, which has recruited 90 per cent. of its establishment. As regards the last part of the question, instructions have been issued to Commands to supply Territorial units with such equipment as may be considered necessary for their training.

Oral Answers to Questions — EX-SERVICE MEN.

NAVY AND ARMY CANTEEN BOARD.

16. Colonel ASHLEY: asked the Secretary of State for War whether his attention has been called to the large number of women employed by the Navy and Army Canteen Board on work which would be very suitable for ex-soldiers; and whether, in view of the large number ex-service men who are out of employment, especially in the Aldershot district, and the demand for domestic ser-
vants, he will cause instructions to be issued that women are replaced by ex-service men wherever possible without ,causing undue hardship?

Sir A. WILLIAMSON: I would refer the hon. and gallant Member to the reply given on 19th November last to the hon. Member for Smethwick (Mr. J. E. Davison), in which the matter is very fully dealt with.

Colonel ASHLEY: Is the right hon. Gentleman aware that the answer is extremely unsatisfactory, and that nothing practically has been done to replace these women by ex-service men, and what does he propose to do in the matter?

Sir A. WILLIAMSON: I cannot agree that the answer was extremely unsatisfactory. I think the answer was a most satisfactory answer, and if the hon. and gallant Member will look at it again I think he will find that the whole case is fully dealt with.

Viscount WOLMER: Is the right hon. Gentleman aware that there are a great many ex-service men who before the War were employed by Army canteen contractors, and who now find they are unable to get employment with the Navy and Army Canteen Board?

Sir A. WILLIAMSON: That may be so. Preference is given to ex-service men, I believe, in the engagements, but there are certain works connected with the Navy and Army Canteen Board for which women are more suitable, and it is not intended to discharge all the women.

Viscount WOLMER: Does the right hon. Gentleman not admit that the Navy and Army Canteen Board, who now hold a Government monopoly, have an obligation to take on those men who were formerly employed by the canteen contractors, and who went to the War, and have now returned to find their livelihood gone?

Sir A. WILLIAMSON: I am not aware of any obligation. The Navy and Army Canteen Board is a different organisation from that which existed before the War. If there is such an obligation I shall be glad to consider it.

Colonel ASHLEY: May I ask if the Navy and Army Canteen Board is not run by the War Office, and is not the War
Office a Government Department, and have not all Government Departments said they will give preference to ex-service men?

Sir A. WILLIAMSON: The first part of my hon. and gallant Friend's question is not correct; it is run by the three Services, and not by one. In regard to the second part, the hon. and gallant Member is correct. Preference is being given to ex-service men so far as is possible.

17. Viscount WOLMER: asked the Secretary of State for War if he will state how many women and girls and how many discharged soldiers are employed by the Navy and Army Canteens Board?

Sir A. WILLIAMSON: The number of women and girls and the number of discharged soldiers employed by the Navy and Army Canteen Board in the United Kingdom are approximately:—

Women and girls
…
2,843


Discharged soldiers
…
1,815

Viscount WOLMER: Are we to understand that the Government's idea of giving a preference to discharged soldiers and sailors is to employ twice as many women as discharged soldiers and sailors?

Sir A. WILLIAMSON: To begin with, the Noble Lord's figure is incorrect. There are not twice as many or nearly twice as many women as discharged soldiers and sailors; and in the second place, there must of necessity, and will be, a number of women employed.

MINISTRY OF PENSIONS.

42. Viscount WOLMER: asked the Minister of Pensions how many women and girls and how many discharged soldiers are employed by his Department?

The PARLIAMENTARY SECRETARY to the MINISTRY of PENSIONS (Major Tryon): I must refer my Noble Friend to the answer which was given to the hon. Member for Frome in reply to a similar question on the 6th July.

Viscount WOLMER: Cannot the hon. and gallant Gentleman simply give the figures across the Floor of the House? Would not that be simpler?

Major TRYON: The figures have been given in detail lately. It is customary to refer to a previous answer instead of repeating the information.

Viscount WOLMER: Has the hon. and gallant Gentleman not figures in front of him, and are they of such a complicated nature that they cannot be given across the Floor of the House?

Major TRYON: I have the extracts from the OFFICIAL REPORT here, but they occupy two sides of a big sheet.

MENTAL TREATMENT.

44. Lieut.-Colonel PARRY: asked the Minister of Pensions whether he is aware of the strong feeling which exists with regard to the position of ex-service men who, whilst undergoing treatment in public mental institutions, are officially regarded and treated as pauper patients; and whether he will state what action he proposes to take in the matter?

Major TRYON: I would refer my hon. and gallant Friend to the full answer which I gave on this matter to the hon. Member for Frome in reply to a similar question on the 28th June, and of which I am sending him a copy.

GOVERNMENT TEMPORARY STAFFS.

78. Mr. HURD: asked the Secretary to the Treasury what are the other Departments in the White Papers 685 and 690 which only employ 1,603 disabled ex-ser-vice men on their temporary staffs as against 5,748 women temporarily employed?

The FINANCIAL SECRETARY to the TREASURY (Mr. Baldwin): The Departments referred to comprise all Government Departments other than those shown separately on the Returns. I will send the hon. Member a list of the Departments.

Mr. HURD: How many Departments are there?

Mr. BALDWIN: I cannot say, but they cover a very large sheet of paper.

Colonel ASHLEY: Are they giving a preference to ex-service men?

Mr. BALDWIN: I think so.

OUT-OF-WORK DONATION, PLYMOUTH.

79. Mr. MYERS: asked the Minister of Labour if he is aware that the men in
receipt of unemployment donation at the rate of 20s. per week at the Plymouth Labour Exchange were penalised by the stoppage of one day's pay at the Whitsuntide holiday, while the men in receipt of 29s. per week unemployment donation were paid in full; and, if so, will he state the reason for this differentiation?

The MINISTER of LABOUR (Dr. Macnamara): Owing to a misinterpretation of instructions, one day's pay was incorrectly deducted at the Plymouth Employment Exchange in the case of certain applicants in receipt of out-of-work donation over the Whitsuntide holidays. Steps have already been taken to correct the error, and I understand that payment of the arrears due was made yesterday.

COMMERCIAL TRAINING.

80. Mr. MYERS: asked the Minister of Labour whether, in the event of any disabled ex-service men in training at commercial colleges having a summer vacation, he will ensure these men receiving the full allowance that the training period provides for; and if he will state whether such period of training will be extended in these cases to cover the loss of time which the vacation involves?

Dr. MACNAMARA: Arrangements have been made for the payment of full allowances, less the living-away-from-home allowance or lodging allowance, to all trainees during their holiday period, which does not exceed four weeks per annum. The holiday period is not included in the period of training.

MINISTRY OF LABOUR.

81. Viscount WOLMER: asked the Minister of Labour how many women and girls and how many discharged soldiers are employed by his Department?

Dr. MACNAMARA: There are at present employed in the Ministry of Labour (at Headquarters and in the Provinces) 5,518 women and girls (excluding cleaners) and 7,690 ex-service men.

LIGHT EMPLOYMENT.

82. Major COPE: asked the Minister of Labour whether he is aware that there
is a large number of men being discharged from hospital with a 30 to 40 per cent. disability pension and certified as fit for light work who are unable to find employment; and, if so, will he state what steps, if any, are being taken, or are proposed to be taken, in such cases?

Dr. MACNAMARA: I am aware that in a number of cases the physical disabilities of disabled men make it extremely difficult to place them in suitable employment. The National Scheme, however, depends on employers being prepared to make sacrifices in the interests of disabled men by employing men whom they might not under ordinary circumstances think physically suitable, and I hope that with the extension of the King's Roll many of these disabled men may be absorbed into industry. I would remind my hon. and gallant Friend of our schemes for training disabled men under which, up to the present, we have trained 23,640; we have in training 24,048; and on our waiting list 22,445. I would add that in the training of these men we always keep in view their prospects of employment when training is completed.

Major COPE: Are all Government Departments on the King's Roll?

Dr. MACNAMARA: Yes; the Treasury on behalf of all Government Departments.

Oral Answers to Questions — NAVAL AND MILITARY PENSIONS AND GRANTS.

10TH MIDDLESEX REGIMENT (CAPTAIN P. H. ELLIS).

19. Lieut.-Colonel JAMES: asked the Secretary of State for War whether he is aware that Captain P. H. Ellis, late of the 10th Middlesex Regiment, was invalided out of the service on account of illness caused by wounds, on 13th June, 1919, with the rank of captain; whether he is aware that this officer has applied for his gratuity under the terms of Army Order 117, of 1919, (3), to be repaid to him, but that hitherto the Army authorities have refused to pay him gratuity due to a captain, but merely gratuity due to a lieutenant; and, as in the Army Order it is distinctly stated that where the officer has been gazetted out with permission to retain higher rank from the temporary or substantive rank held
by him at the date of the termination of his service, the gratuity may at once be assessed on the basis of such higher rank, whether he will explain the reason for this differential treatment?

Sir A. WILLIAMSON: Army Order 117 of 1919 referred to acting rank only. As Captain Ellis did not hold acting rank he does not, therefore, come under the provisions of that Army Order.

PARENT'S PENSION REFUSED (MRS. FULTON).

41. Mr. N. MACLEAN: asked the Minister of Pensions whether he is aware that Mrs. Fulton, 580, Govan Road, Govan, mother of the late Private A. Fulton, No. 7,015, Gordon Highlanders, has been refused a pension on the ground that she is not in pecuniary need; and whether he will reconsider this decision?

Major TRYON: As Mrs. Fulton was not dependent upon her late son prior to his enlistment, and as a recent inquiry into her circumstances showed that the income of her household was such that she could not be regarded as being in pecuniary need, the award of a parent's pension is not at present admissible under the terms of the Royal Warrant.

Mr. MACLEAN: Is the hon. and gallant Gentleman aware that this woman's husband is at present lying awaiting an operation, that there is no money coming into the house, that she is in necessitous circumstances; and is he aware further that when visitors do go to the houses of the applicants for pensions, and see those applicants in a comfortable position, they advise them to sell the furniture in order to get money before making further application?

Major TRYON: If there be any recent change in the facts, I will gladly inquire about it, and have the case re-opened if there is any claim in favour of Mrs. Fulton. The information given to me was that we were not entitled to grant a pension, but if there is a change in the circumstances, that is a different matter, and I will inquire at once.

Mr. HOGGE: Have the Ministry of Pensions abandoned the payment of 5s. flat rate pension per week to parents, altogether apart from the question of dependence? Have they abandoned that?

Major TRYON: If the hon. Gentleman will put that question down, I will in-
quire into that aspect of this case, but that appears to be covered by the latter part of my answer that this woman is not eligible at present for a parent's pension.

NEW REGISTER (COST).

43. Mr. WILSON-FOX: asked the Minister of Pensions whether he is aware that on 14th May, 1920, a new form of register, specially printed and bound, was supplied by the Ministry of Pensions to local war pensions committees for the purpose of recording applications by the wives and dependants of serving men for allowances and grants in supplementation of separation allowances; that a circular, dated 7th May, 1920, had been issued by the Ministry of Pensions to local war pensions committees informing them that no fresh applications for supplementary allowances and grants were to be entertained; and that all such allowances and grants then in issue were to cease on 30th June; and whether he will state the amount of the expenditure involved in the printing, binding, and issuing of these registers?

Major TRYON: The register to which my hon. Friend refers was compiled last year in response to requests from a number of war pensions committees, and copies have been issued from time to time since January of this year to those committees who requested them. The decision to terminate the issue of supplementary allowances had not at that time been taken by the Government. I need hardly add that the further issue of the register has been stopped. I am informed by H.M. Stationery Office that the cost of printing, binding, and issuing the registers was approximately £415.

Oral Answers to Questions — IRELAND.

DISTURBANCES, FERMOY AND LISMORE.

20. Lieut.-Commander KENWORTHY: asked the Secretary of State for War whether he can now make any statement with regard to the recent dsturbances at Fermoy and Lismore in which soldiers are stated to have damaged houses and shops; and whether there were any casualties to troops or to civilians during the disturbances?

Mr. CHURCHILL: I can add nothing at present to my replies to questions on Tuesday last on this subject.

Lieut.-Commander KENWORTHY: May I ask the right hon. Gentleman when he expects to have the information necessary, and is he aware that many painful statements have been made in the Press about these occurrences?

Captain WEDGWOOD BENN: Did the right hon. Gentleman not say he was making inquiries, and are the inquiries completed?

Mr. CHURCHILL: The inquiries are still proceeding.

Mr. DONALD: Is the right hon. Gentle-aware that the hon. Members who put these questions on the state of Ireland are friends neither of Ireland nor of this country?

Lieut.-Commander KENWORTHY: Friends of the Empire.

Mr. STANTON: Not you.

DESTRUCTION OF PETROL, MULLINGAR.

31. Colonel ASHLEY: asked the Secretary of State for Air whether he is aware that on the night of 30th June, 3,000 gallons of petrol conveyed in five wagons, consigned to the Royal Air Force, Oran-more, county Galway, were maliciously destroyed at Mullingar railway station; whether any escort of soldiers or police was in charge of the convoy; and what is the finding of the court of inquiry held to investigate this loss of public property?

Mr. CHURCHILL: From reports received, it appears that 3,000 gallons of petrol were looted at Mullingar while en route from Dublin by rail: 1,250 gallons were subsequently recovered. With regard to the second and third parts of the question, the report of the Court of Inquiry has not yet been received.

Colonel ASHLEY: Might I have an answer as to whether any escort of police or soldiers was sent with this enormous consignment?

Mr. CHURCHILL: My hon. and gallant Friend draws attention to a very serious omission in my answer, which I did not notice myself in examining the question, and if he will put it down again I will give a special answer to that next time.

Mr. ORMSBY-GORE: Is the right hon. Gentleman aware that this is not an isolated instance of looting of petrol on the Midland and Great Western Railway of
Ireland, and that large consignments on other occasions recently have been taken by the Sinn Feiners without the British Government doing anything to look after these?

ROYAL IRISH CONSTABULARY (PENSIONERS).

89. Sir JOHN BUTCHER: asked the Chief Secretary for Ireland whether in view of the poverty of many of the pensioners of the Royal Irish Constabulary and of the difficulty of their getting employment, notwithstanding that they are trained and capable and deserving men, he will replace the civilian clerks in the Administrative Department of the Royal Dish Constabulary in Dublin by pensioners of that service?

The ATTORNEY-GENERAL for IRELAND (Mr. Henry): I would refer my hon. Friend to the reply given to a question asked on this subject by the hon. Member for Wrekin on the 7th instant. The work could not be done by Royal Irish Constabulary pensioners.

Colonel ASHLEY: As a matter of fact, in the old days, were not Royal Irish Constabulary pensioners alone employed in this office?

Mr. HENRY: I cannot speak for that period, but the work of the office is largely dealing with pensions and requires a good deal of skilled knowledge?

HOUSE RENT, CROMBIE.

30. Mr. WALLACE: asked the Financial Secretary to the War Office what are the rents of the houses at Crombie occupied by the War Office employés there: and how the rents at Crombie compare with a similar class of house at Rosyth?

Sir A. WILLIAMSON: I am informed that no houses are owned or occupied by the War Department at Crombie or Rosyth.

MOTOR CAR ACT (POLICE CONTROLS).

32. Commander Viscount CURZON: asked the Secretary of State for the Home Department how many police controls were in operation in the Metropolitan Police area for detecting infringements of
the Motor Car Act between a.m. 10th July and p.m. 12th July; how many police-officers were employed; and with what success?

The UNDER-SECRETARY of STATE for the HOME DEPARTMENT (Sir John, Baird): There were 93 controls during the three days; 70 officers were employed; and 164 cases were reported for prosecution.

TEACHERS' SALARIES, SCOTLAND.

37. Mr. N. MACLEAN: asked the Secretary for Scotland whether it is the case that a grant of £13,000 was made to be distributed as retrospective pay for the year 1918–19 to school teachers; whether a share of this money has been sent to the Mossbank industrial school, Glasgow; whether the staff at this school, on recent application for this money to be distributed in accordance with the recommendation of the Departmental Committee's Report, have been told that the money has been placed to the school funds, as the advances already granted were adequate; whether he can state if a grant of money for a specific purpose can be used for other school funds; and whether, in view of the fact that the advances granted to the staff at Mossbank are only 30 per cent. above the 1914 standard, he will make representations to the governors of the school to apply the money to the purpose for which it was granted?

The SECRETARY for SCOTLAND (Mr. Munro): The sum provided by the Treasury for the increase of the salaries of officers of reformatory and industrial schools in Scotland for the year ended 31st March, 1919, was £2,750. It was paid as a special grant of 10s. for 1918, child in the schools on 31st March,1918, after approval of a statement showing that the grant would be distributed as a war bonus to those members of the staff who did not in the year mentioned receive an adequate salary. Where suitable increases had already been given by the managers for the whole period 1st April, 1918, to 31st March, 1919, in anticipation of this assistance, it was open to the managers to use the special grant for recouping the funds of the school to the extent of the expenditure already incurred in respect of increased salaries
for the financial year. The application of the grant of £180 made to Mossbank industrial school in this manner was approved in view of the fact that increases to a total of £800 had already been granted to the officers by the managers.

Mr. MACLEAN: Does the Secretary for Scotland agree that 30 per cent. increase on the pre-War standard is a suitable advance to warrant the allocation of this money to other purposes than that for which it was granted?

Mr. MUNRO: As I explained to my hon. Friend, the money was allocated in the way stated because the governors had anticipated the grant to the extent of £800. As regards the total sum distributed, that was fixed by the Treasury.

BOLSHEVIK PROPAGANDA (GREAT BRITAIN).

47. Mr. RAPER: asked the Prime Minister whether he has now had an opportunity of reading the copies of letters implicating Lieutenant-General Sir Hubert Gough, head of the late Inter Allied Military Mission in Finland, Commander Harold Grenfell, late naval attaché, and Professor Cotter, late Press attaché, at the British Legation, Helsingfors, as being associated with a notorious Bolshevik agent in Helsingfors; and what action the Government purposes taking in this matter?

4. Mr. L'ESTRANGE MALONE: asked the Under-Secretary of State for Foreign Affairs whether any documents have been sent to London by the British Minister in Finland and received by the Foreign Office implicating General Sir Hubert Gough, late head of the Inter-Allied Military Mission in Finland, Commander Grenfell, formerly head of a Naval Mission to Finland, and Professor Cotter, late Press Attaché to the British Legation in Helsingfors, in plotting to introduce a Bolshevist regime in this country?

Mr. BONAR LAW: I have read the copies of the letters referred to, but I do not consider that they call for any action on the part of His Majesty's Government.

Mr. RAPER: May I ask whether it is not a fact that the officers referred to in
my question are described as being absolutely Red, and in the correspondence they also express an earnest wish that the agent referred to may come over here?

Mr. BONAR LAW: I found it difficult to have patience to read the letters, which, to a prosaic mind like mine, seemed nonsense: but I do not think they call for any action.

Lieut.-Commander KENWORTHY: Is the right hon. Gentleman aware that the hon. Member for East Islington (Mr. Raper) dined with this notorious Bolshevik agent in Helsingfors, and is he satisfied that the letters in question are genuine?

Mr. BONAR LAW: No, Sir, I have no information beyond what I have given. I have read the letters, and I do not think they call for any action.

Mr. C. PALMER: Do not these letters clearly show that these British officers were philandering with this woman, who is an agent of the Reds?

Mr. BONAR LAW: There is nothing in the letters, except what other people say, to affect General Gough. As regards the other gentleman, he retired from the position of Naval Attaché, and is on the Retired List. I do not think we really need take further notice of it.

Lieut.-Commander KENWORTHY: In view of the fact that attacks have been made on officers who have no opportunity of replying, I shall raise this on the Motion for the Adjournment on Thursday.

NAURU ISLAND AGREEMENT BILL.

52. Mr. ORMSBY-GORE: asked the Prime Minister whether any price was agreed by him and the Prime Ministers of Australia and New Zealand for the purchase of the shares of the Pacific Phosphate Company when he signed the agreement for such purchase in Paris; what price is now proposed to be paid for these shares; and how much money will be advanced by the British Treasury for the purchase of the shares during the current year?

The UNDER-SECRETARY of STATE for the COLONIES (Lieut.-Colonel Amery): It has never been proposed that the shares should be purchased. With regard to the payments made in
respect of rights and property of the Pacific Phosphate Company, I beg to refer my hon. Friend to Command Paper 749.

RETIRED OFFICERS (CIVIL EMPLOYMENT) ACT, 1919

56. Colonel ASHLEY: asked the Chancellor of the Exchequer whether he is aware that some of the retired officers Government employment have not yet been paid the sums which were illegally deducted from their pay in the interval between the passing of the Retired Officers (Civil Employment) Act, 1919, and the framing of the new rules; and will he take steps to expedite payment of these sums owing for nearly a year?

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain): The deductions are not illegal, for the Act does not come into operation until an Order has been issued thereunder. regret that this Order has been so long delayed, but it will be laid, I hope, in a few days, arid instructions are being issued to Departments to make the refunds for which the Order will give formal authority.

Oral Answers to Questions — GOVERNMENT DEPARTMENTS (ECONOMY COMMITTEES).

57. Captain TUDOR-REES: asked the Chancellor of the Exchequer whether he will consider the desirability of forming Economy Committees, similar to those set up for other Departments, for the War Office and the Ministry of Transport?

Mr. CHAMBERLAIN: I have reserved for later consideration the question of extending these inquiries to other Departments, and I do not at present propose to suggest committees for either the War Office or the Ministry of Transport. The Ministry of Transport being a new Ministry, the whole of its staff has been quite recently under review by the Treasury. In the case of the War Office, the staff has been reduced from 18,324 at the Armistice to 6,764 on 1st June last, and my right hon. Friend the Secretary of State for War expects to make further reductions before long. But as with the Navy, so with the Army, extra work continues long after hostilities have ceased. To give only one instance, I am informed that the correspondence with the public is six times as heavy as before the War.

Captain W. BENN: Does not the right hon. Gentleman think that a new Ministry is precisely the Ministry into which inquiry is most desirable?

Mr. CHAMBERLAIN: No, Sir; every post in the new Ministry has recently had to be sanctioned. The old Ministries are, of course, old Ministries, and have not been under such minute and special review.

Mr. MARRIOTT: May I ask the Chancellor of the Exchequer whether these economy Committees are entitled to inquire into questions of policy as well as of expenditure?

Mr. CHAMBERLAIN: No, Sir, as I said yesterday—

Mr. MARRIOTT: I did not hear.

Mr. CHAMBERLAIN: They are not appointed to inquire into policy.

Mr. MARRIOTT: If they are not entitled to deal with questions of policy, in what respect do their functions differ from those of the Committee on National Expenditure?

Mr. CHAMBERLAIN: These are specific Committees. The Committee on National Expenditure does not, I think, examine into the details of the staffing arrangements of the Departments. These others are small Special Committees, with special qualifications to examine into the staffing arrangements and the organisation of particular Departments, to see whether their organisation is good or bad, and whether any improvements in organisation or any reduction in staff can be effected.

Mr. MARRIOTT and Sir C. KINLOCHCOOKE: rose—

Mr. SPEAKER: Further questions had better be put down.

58. Captain TUDOR-REES: asked the Chancellor of the Exchequer whether it is proposed to publish the results of the investigations to be made by economy Committees in the various Departments?

Mr. CHAMBERLAIN: I think that it will probably be desirable to publish the Reports, but I should not like to come to a final decision till they have been received, and I have had an opportunity, if necessary, of consulting the Chairmen.

Mr. G. TERRELL: Will the right hon. Gentleman consider the desirability that the investigations of these Committees should be in public, so that we may know from day to day the evidence that is being submitted?

Mr. CHAMBERLAIN: I do not think that would be a businesslike procedure. I see the work of the Committees: it should not be done in public.

62. Mr. REMER: asked the Chancellor of the Exchequer whether the Committees of Inquiry into Government extravagance will have as part of their reference the policy of the Ministry which causes extravagance, particularly the continuance of control by the Ministry of Food in several directions which causes losses to the Government, waste of valuable foodstuffs, and needless jobs for unnecessary officials?

Mr. CHAMBERLAIN: No, Sir. The Committees are not Committees to enquire into Government policy, but into the staff and organisation of certain Departments. The terms of reference will be as follows:
To examine either by way of test examination or otherwise, as they may see fit, the staffing and methods of work of the Department, and to report what, if any, economies may be effected therein, having regard to the work which the Department is called upon to perform in the execution of the policy decided by the Government.

Mr. REMER: Is the right hon. Gentleman not aware that this decision will limit the scope of the inquiry to a very small and minute one?

Mr. CHAMBERLAIN: No, Sir; I am not aware of that. If the allegations habitually made be true that will not be the case. The allegation is that Government Departments are overstaffed for the work they have to do, and that is the question which these Committees are invited to investigate.

Sir C. KINLOCH-COOKE: Will the right hon. Gentleman say whether the Central Control Board (Liquor Traffic) is included in this inquiry?

Mr. CHAMBERLAIN: I think not. I do not carry in my mind all the particular Departments.

Mr. HOGGE: Will the right hon. Gentleman state how the Members of this
House will be appointed? Will the names be put down on the Paper, and moved in the ordinary way, or will the right hon. Gentleman invite hon. Members to serve?

Mr. CHAMBERLAIN: No, Sir. They will be appointed in the ordinary way. It is only in the case of Committees of this House that a Motion is made for the appointment of certain Members. When a Departmental Committee is formed on the invitation of a Minister, it is done by an invitation to particular Members.

Mr. REMER: Is the right hon. Gentleman not aware that it is the policy of the Department which causes the extravagance of which complaint is made?

Mr. CHAMBERLAIN: That is not the only allegation made. There is the other allegation which I have already described. If the policy is challenged, it should be done in this House on the Votes of the Ministries.

Viscount WOLMER: Will it be competent for the Committee to report what is the actual cost?

Mr. CHAMBERLAIN: The business of the Committee is to see whether, for the work which is set the Government Department to do, they are overstaffed or ill-organised.

Oral Answers to Questions — LAND VALUES DUTIES.

59. Mr. RAPER: asked the Chancellor of the Exchequer the net financial result of the Land Tax for the entire period the same was in force?

Mr. CHAMBERLAIN: I assume my hon. Friend refers to the Land Values Duties imposed by the Finance (1909–10) Act, 1910: I would refer him to the answers, copies of which I am sending him, given to my hon. Friend the Member for Penryn and Falmouth on the 26th April, and to the hon. and gallant Member for Bournemouth on the 20th May.

Oral Answers to Questions — TRANSPORT.

NORTH EASTERN RAILWAY COMPANY.

60. Mr. PALMER: asked the Chancellor of the Exchequer when the North Eastern Railway Company first put forward the claim to include in the State
guaranteed expenditure the £50,000 paid to the Minister of Transport; when was that claim disallowed by the Ministry of Transport; at what date was it then put forward to the Treasury; and when did the Treasury arrive at its decision disallowing the claim?

Mr. CHAMBERLAIN: The item referred to, which was included in the railway company's claim in respect of the year 1918, came before the Railway Accountants' Committee at their meeting of 13th April, 1920; it was immediately reported on by the representative of the Ministry of Transport who attended that meeting. It was referred to the Treasury on 16th April; I instructed Sir Hardman Lever, the Treasury representative at the Ministry, on the 20th April. When the item was next before the Railway Accountants' Committee, namely, on 18th May, its inclusion as a working expense was formally dissented from by the Ministry's representative.

61. Mr. PALMER: asked the Chancellor of the Exchequer whether the North Eastern Railway Company, whose claim to be reimbursed under the State guarantee the £50,000 granted to the ex-deputy general manager of the company, have the right of appeal from the Treasury decision disallowing the payment to the Railway and Canal Traffic Commissioners; and whether he will lay upon the Table of the House the original agreement made between the company and the ex-deputy general manager, together with the terms of settlement under which the £50,000 was paid over?

Mr. CHAMBERLAIN: The answer to the first part of the question is in the affirmative. I am not in possession of either of the documents referred to in the latter part of the question. If, as I understand is likely to be the case, the company contests the Treasury ruling, the claim will be referred to the Law Officers, by whose advice our further action must be guided.

Mr. PALMER: Will the right hon. Gentleman answer the last part of my question, as to whether the original agreement will be laid upon the Table of the House, and whether it is not a fact that this question has to go before the Railway and Canal Traffic Commissioners, and therefore will not be submitted to the Law Officers of the Crown?

Mr. CHAMBERLAIN: That is exactly the question which I have answered.

STATE SUBSIDIES.

50. Colonel NEWMAN: asked the Prime Minister whether he is aware of the demand of the middle classes, who compose the largest section of the community, that the agreements, deficiencies, and subsidies, representing a gross charge in the present year of over £111,000,000 on the taxpayer, shall cease: and is he prepared to abandon the policy of subsidising one section of the community at the expense of another?

Mr. BONAR LAW: I do not accept my hon. and gallant Friend's figures, but it is the general policy of His Majesty's Government to bring all war subsidies to a close at the earliest possible moment, and steps have already been taken to end them all, with the exception of the bread subsidy.

Oral Answers to Questions — LEAGUE OF NATIONS.

MANDATED TERRITORIES.

51. Mr. ORMSBY-GORE: asked the Prime Minister whether, under Article 22 of the Covenant of the League of Nations, the only mandatory territories which are to be open to the free and equal opportunities for the trade and commerce of all members of the League are Togoland, Cameroons, and Tanganyika territory; and whether, in all other mandatory territories, the mandatory Power has power to restrict the trade and export of produce of the territory to the use of its own nationals?

Mr. BONAR LAW: It is only in the fifth paragraph of Article 22 of the Covenant of the League of Nations that "equal opportunities for the trade and commerce of other members of the League" are expressly provided for. The territories to which this provision applies are those which formerly constituted German East Africa, the Cameroons and Togoland. In the case of the former German Colonies, which, under the sixth paragraph of Article 22 are to be administered "under the laws of the mandatory as integral portions of its territory," the provision of equal opportunities for trade and commerce will be a matter for the discretion of the mandatory.

Mr. ORMSBY-GORE: What about the ex-Ottoman territories, Mesopotamia, Syria, and Palestine?

Mr. BONAR LAW: I should like my hon. Friend to put down a question for next week.

Captain W. BENN: Cannot the right hon. Gentleman say what is the policy of the Government; is it to have the open door or not for the mandated territories?

Mr. BONAR LAW: Has my hon. and gallant Friend by any chance read the Treaty? If so, he will have seen that As regards German South Africa, the reason for this distinction in the mandate was that it is impossible to treat it except as part of South Africa as a whole.

INDIAN ESTIMATES.

54. Sir H. CRAIK: asked the Lord Privy Seal if, in view of the fact that the Debate on the Indian Estimates was confined entirely to one topic, he will arrange that the House have another early opportunity of discussing other questions of Indian administration which are of special importance at this juncture?

Mr BONAR LAW: I am afraid that it is quite impossible to find time for another discussion before the adjournment.

Sir J. D. REES: Is the right hon. Gentleman aware that while Ministers, Labour leaders, Ruperts of debate, cold-weather tourists, and officers of the British Army—

Mr. SPEAKER: I should like to see that catalogue on the Order Paper.

Sir J. D. REES: With great respect, Sir, may I ask whether I am in Order in asking my right hon. Friend whether he noticed that the Indian Civil Service and the Indian Army, which were vitally interested, were not called to take any part in this Debate?

Mr. BONAR LAW: I have always noticed that in any important Debate a great many Members of the House think that the right people have not spoken.

Sir J. D. REES: Does my right hon. Friend really think that personal knowledge and experience are to be conclusive
disqualifications for taking part in any particular Debate?

Mr. SPEAKER: The calling of any particular persons to take part in Debate does not rest with the Leader of the House.

THEATRES (SALE OF CHOCOLATES).

55. Viscount CURZON: asked the Lord Privy Seal why it is intended to continue to prohibit the sale of chocolates in theatres and under what Regulation; and whether some compromise more satisfactory to the public could be arrived at?

Sir J. BAIRD: My right hon. Friend has asked me to reply to this question. In the absence of further legislation, the restriction referred to would be continued as part of the existing General Early Closing Order under No. 10B of the Defence of the Realm Regulations, so long as that Order remains in force. A proposal to relax this restriction was rejected on the 20th April by the Standing Committee on the Shops (Early Closing) Bill, and I would refer my noble Friend to the Report of the Committee's proceedings. In view of that decision, my right hon. Friend would not feel justified in proposing any alteration. I should be very glad if a satisfactory compromise could be reached, but the endeavours made for this purpose have been without success.

Viscount CURZON: If a compromise is arrived at, will the Government give fair consideration to the relaxation of this regulation?

Sir J. BAIRD: As I have just said, we have not yet succeeded in arriving at a compromise.

Colonel WEDGWOOD: Will the Government consider the public interest instead of solely the vested interests concerned?

Commander BELLAIRS: If the matter is going to be dealt with in the Shops Bill, will the hon. Gentleman bear in mind the vote of the Committee in favour of restricting the sale of chocolates in theatres as in the shops?

Sir J. BAIRD: I think I have covered that in my answer.

Oral Answers to Questions — FOOD SUPPLIES.

YEAST.

67. Mr. SITCH: asked the Minister of Food if he is aware that the price of yeast made and sold in the United Kingdom has recently been advanced by £8 per ton; that, based on the normal daily consumption of this commodity, the enhanced cost represents an additional charge upon the community of approximately £800 per day; and whether he will require the manufacturers to satisfy him that the increase is justified?

The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Mr. Bridge-man): I have been asked to reply. I was not previously aware of the increase in the price of yeast referred to in the question. The information with which the hon. Member was so good as to supply me at the beginning of June concerning an alleged combine among the distillers of yeast has been referred to the Central Committee under the Profiteering Act for investigation, but I understand that owing to the number of other investigations at present pending the Committee have been unable as yet to institute an inquiry into this matter. I am calling the attention of the Committee to the facts stated in the question. I would, however, inform the hon. Member that a preliminary investigation into the price of yeast was made by the Standing Committee on Prices of the Central Committee as recently as May last, when the Committee decided on the evidence then before them that, having regard to the increase in the cost of wages and materials, the increase in the price of yeast did not appear to be unreasonable.

SUGAR.

68. Lieut.-Colonel CROFT: asked the Minister of Food whether any sugar has yet been bought from Germany or Austria; and, if so, what was the name of the merchant through whom this transaction took place?

The PARLIAMENTARY SECRETARY to the MINISTRY of FOOD (Sir W. Mitchell Thomson): The reply to the first part of the question is in the negative. The second part does not, therefore, arise.

FOOT-AND-MOUTH DISEASE.

70. Captain COOTE: asked the Parliamentary Secretary to the Ministry of
Agriculture what is the total number of animals slaughtered as the result of outbreaks of foot-and-mouth disease during the last three months?

Colonel GIBBS: The total number of animals slaughtered during the last three months in connection with outbreaks of foot-and-mouth disease were: cattle, 772; sheep, 5,265; pigs, 271; goats, 2.

Captain COOTE: Will my right hon. Friend make representations as to the very serious loss of food supplies which have resulted from this indiscriminate slaughter of animals, and whether a wider policy of isolation could not be embarked upon?

Colonel GIBBS: I will do so with pleasure.

Captain TERRELL: Can the hon. Member state which part of the country is affected?

ROYAL BOTANIC GARDENS (EDINBURGH).

72. Mr. W. GRAHAM: asked the First Commissioner of Works whether his attention has been called to the fact that the Royal Botanic Gardens, Edinburgh, were, during the War, open to the public during the summer season until 10 p.m.; whether, although there is now an adequate staff, the public are turned out of the gardens between 8 and 9 p.m., and it has been announced that in no case will they be open later than 9 p.m.; and whether, in view of the importance of Edinburgh as a summer resort, he will take steps to restore the former facilities for the benefit of residents and visitors?

The FIRST COMMISSIONER of WORKS (Sir Alfred Mond): Experience showed that the gardens were very little used between 9 and 10 p.m., and I am advised that the present arrangement gives general satisfaction. Any extension of hours would involve additional expenditure which in my opinion would not be justifiable.

IMPERIAL WAR MUSEUM (CRYSTAL PALACE).

73. Mr. T. A. LEWIS: asked the First Commissioner of Works what the responsibility and liabilities of the Imperial War
Museum and his Department are in respect to the partial occupation of the Crystal Palace?

Sir A. MOND: The responsibility of the Imperial War Museum authorities is confined to the arrangement and maintenance of the objects of the museum, and to the supervision of that portion of the Crystal Palace in which they are housed. My Department is responsible for the provision of accommodation for the Imperial War Museum exhibits, and has for this purpose leased from the Crystal Palace trustees a portion of the Crystal Palace premises on a four years' tenancy at a rental of £25,000 per annum (inclusive of heating, lighting, cleaning, police, etc.). There is no obligation on either the Imperial War Museum or my Department, as far as the general upkeep of the Crystal Palace and its grounds is concerned, which is entirely in the hands of the Crystal Palace trustees.

Mr. HOGGE: Can my right hon. Friend say what part of the receipts for entrance come to his organisation?

Sir A. MOND: The receipts for entrance go to the Crystal Palace trustees under the arrangement.

CENOTAPH, WHITEHALL.

74. Viscount CURZON: asked the First Commissioner of Works whether the date of the re-opening of the Cenotaph has yet been fixed; and, if not, will he consider whether it is possible to re-open it on the 11th of November at 11 o'clock?

Sir A. MOND: No date has yet been fixed, but it is hoped that the Cenotaph will be completed by the end of October, and I will certainly favourably consider the suggestion of the hon. and gallant Member.

GOVERNMENT DEPARTMENTS (MALE CLERKS).

76. Sir J. BUTCHER: asked the Financial Secretary to the Treasury whether a decision has yet been reached as to the payment of male clerks in Government Departments who are under 21 years of age, and who served in the forces during the War, on the same scale a s those over 21 years of age?

Mr. BALDWIN: Negotiations on this question are still proceeding. The staff associations are at present considering proposals made by the Treasury.

Sir J. BUTCHER: Is the decision any nearer completion than it was a fortnight ago?

Mr. BALDWIN: Yes.

LAW COURTS ATTENDANTS.

77. Mr. CAUTLEY: asked the Financial Secretary to the Treasury whether he has now considered the hard position of the attendants at the Law Courts, who are compelled to retire without pension at the age of seventy; whether, having regard to the necessity of the services performed by these public servants, the time has yet come that they should be put upon the establishment of the Civil Service and pension rights be secured to them; and, in particular, whether something more than the usual small gratuity can be given to the twelve or fifteen men who are leaving the service in September next on account of having reached the age limit?

Mr. BALDWIN: This matter is at present under discussion between officers of the Treasury and of the Lord Chancellor's Department. The answer to the last part of the question is in the negative.

SUBMARINE CABLEGRAMS (DELAYS).

84. Lieut.-Colonel GUINNESS: asked the Postmaster-General whether he can say what is the greatest number of hours' delay which has taken place during the last month for which figures are available between the handing in of telegrams at local telegraph offices and their despatch by submarine cable from this country?

The POSTMASTER-GENERAL (Mr. Illingworth): The greatest delay which has taken place during the last month, so far as telegrams to the Continent are concerned, was about 22¼ hours. This occurred on the traffic to Italy, which has been much congested owing to staff difficulties in that country. The average delay on telegrams to the Continent during the month was about 4½ hours.
In the case of traffic forwarded to the Near and Far East, the maximum delay was about 24 hours, the average being about 10½ hours. To North America viâ the Imperial Cable, the maximum delay was about 10 hours, and the average about 3¾ hours.

Lieut.-Colonel GUINNESS: Can the right hon. Gentleman explain why it is found quicker to telegraph from London to Paris viâ New York than direct through the London Post Office to Paris, even when paying the exorbitant so-called urgent rate of 6d. per work to Paris?

Mr. ILLINGWORTH: If the hon. and gallant Member had given me notice of the question I should have been glad to give him a proper reply. I have not had time to check the facts, but probably one route by which the wire was sent was slack at the time while the traffic on the other was very heavy. It is difficult to explain by answer to a question, but if the hon. and gallant Member wishes, I will send him a paper which will give him all the information he requires.

Lieut.-Colonel GUINNESS: Is the right hon. Gentleman aware he is misinformed? Both telegrams were sent off simultaneously at 12.18, and the one viâ New York beat the one by the direct route by 20 minutes.

Mr. ILLINGWORTH: I have said I have not checked the figures. It is quite possible that at the time the messages were handed in the traffic on one route was slack and on the other heavy.

Lieut.-Colonel GUINNESS: Is it fair to charge treble rates for an absolutely illusory advantage?

Mr. ILLINGWORTH: It is far more expensive to send by way of New York. Very important telegrams get through to the Continent many hours sooner than if they are sent in the ordinary course.

Oral Answers to Questions — HOUSING.

LUXURY BUILDING.

85. Sir J. BUTCHER: asked the Minister of Health whether his attention has been called to a resolution of the York City Council of the 5th instant whereby, after pointing out that Section 5 (1) of
The Housing (Additional Powers) Act, 1919, has the effect of causing builders to transfer their labour to works of repair or to other districts where the powers of that section are not enforced, they strongly urge the Governent generally to prohibit building or repair of any nature other than housing, unless the builder obtains a certificate from the local authority that such building or repairs are absolutely essential and will not interfere with or delay the provision of dwelling accommodation in the area of the local authority; and what steps he proposes to take in the matter.

The MINISTER OF HEALTH (Dr. Addison): Yes, Sir, my attention has been called to this Resolution. I hope shortly to submit further proposals in regard to the prohibition of luxury building, but it is not intended to propose a system of licensing for this purpose.

Sir J. BUTCHER: In view of the great importance of this matter, will the right hon. Gentleman give this his immediate attention?

Dr. ADDISON: Yes.

ROYAL COLLEGE OF ART (PRINCIPAL).

86. Mr. STANTON: asked the President of the Board of Education whether Mr. William Rothenstein has been appointed principal of the Royal College of Art; whether, seeing that the Royal College of Art was founded for the development of industrial art and for the training of art teachers, he will say what are Mr. Rothenstein's qualifications for either purpose; whether he is purely a painter; what experience of art school management or organisation he has; and what was the number of students attending his lectures during the last session of his professorship of civic art in the University of Sheffield?

The PRESIDENT of the BOARD of EDUCATION (Mr. Fisher): With my hon. Friend's permission, I propose to circulate the reply in the OFFICIAL REPORT.
The following is the reply referred to:
I have appointed Professor William Rothenstein to be Principal of the Royal
College of Art. In his lectures and published writings he has urged a fuller use of the services of British craftsmen, whether in artistic industry, or in public decorative work, and he has long been known as interested in the teaching of art: he has worked as an artist in other crafts than painting, for example, in lithography, etching and medallion design; he was for some years a member of the Advisory Committee for the London County Council Bolt Court School of Photo-Engraving and Lithography, and was for a year a teacher in the London County Council Central School of Arts and Crafts. During the last session of his professorship of civic art at Sheffield, his lectures, which were public, were largely attended, especially by teachers, including teachers of art; but civic art is not a specific subject of university study with a regular body of students. I consider myself fortunate in having secured Professor Rothenstein's services, and am satisfied that he is the best man available to secure the development of the College on lines which will increase the influence of art on craft and industry.

Oral Answers to Questions — MESOPOTAMIA.

RISING, RUMEITHA.

Mr. ORMSBY-GORE (by Private Notice): asked the Secretary of State for War whether an Indian garrison stationed to the west of the Euphrates in Mesopotamia has been surrounded and cut off by rebel Arabs; whether several attempts have been made to relieve this isolated garrison, so far without success; what are the British and Indian casualties to date; whether the rising is more than purely local in character and what was its chief cause?

Mr. CHURCHILL: On 2nd July the Government building at Rumeitha on the Euphrates was attacked by Arabs and the Arab guard killed. On the next day the railway was cut in three places, above and below Rumeitha, and near Samawa. Reinforcements from Basrah reached Samawa on 3rd and 4th July, and a small column was sent out from the north for Rumeitha. This column suffered some casualties, and owing to the cutting of a
canal was unable to reach the town. There is no report of any British casualties up to date. The number of Indian casualties is not yet known. Further reinforcements have been despatched from Baghdad, and punitive measures are being taken by troops and Royal Air Force. The rising appears to be local in character. It is probably the outcome of religious agitation in Nejf. The immediate cause of the outbreak was the arrest by the Civil Authorities of a local Sheikh, who had been inciting the tribesmen to rebellion.

Lord ROBERT CECIL: Is the garrison in fact surrounded or not? I could not quite gather whether that is so from the reply.

Mr. CHURCHILL: It has not yet been relieved: it is still holding out. A considerable column has gone out from Baghdad to join up with the garrison to establish order in the district.

Mr. GWYNNE: Will the right hon. Gentleman see that the officer in command is informed he will not be accused of an error of judgment if he deals with this situation firmly?

MEMBER'S APOLOGY.

Lieut.-Commander KENWORTHY: I desire to make a personal apology for, and withdrawal of, a remark which I made reflecting on the hon. and gallant Member for Bournemouth (Lieut.-Colonel Croft). In the Debate on Thursday, I said, rather audibly, that he had been sent home. This was heard by several hon. Members, and although that remark was made in good faith and with no reflection on the personal bravery of the hon. and gallant Member, I admit it was quite improper. As a matter of fact, I have found out from more than one source that it was quite inaccurate, and I wish to take this opportunity of making as full a withdrawal and apology as I can to the hon. and gallant Member for my unfortunate remark. Perhaps I may be permitted, in order to show how fully I withdraw, to read four lines from a report by this hon. and gallant Member's commanding officer on the last occasion when a report was made on him at the Front. It reads:
He is quite an exceptionally fine commanding officer, a born soldier and leader of men. He has done magnificent work through the War, and his promotion would be very much in the interests of the Service.

Lieut.-Colonel CROFT: May I be permitted to express my thanks to the hon. and gallant Gentleman for the most handsome manner in which he has withdrawn his remark.

BILLS PRESENTED.

INDECENT ADVERTISEMENTS BILL,

"to make further provision with respect to indecent advertisements and notices, and for purposes connected therewith," presented by Mr. NEIL MACLEAN; supported by Mr. Clynes, Mr. Tyson Wilson, Mr. Thomas Griffiths, and Mr. Wignall; to be read a Second time upon Tuesday, 27th July, and to be printed. [Bill 164.]

EMPLOYMENT OF CHILDREN (AMENDMENT) BILL,

"to amend the Employment of Children Act, 1903," presented by Lord HENRY CAVENDISH-BENTINCK; supported by Captain Wedgwood Benn, Mr. Briant, Mr. William Graham, Major Hills, Mr. Spoor, and Mr. Woolcock; to be read a Second time upon Thursday, and to be printed. [Bill 165.]

CRIMINAL INJURIES (IRELAND) BILL,

"to amend the enactments relative to compensation for Criminal Injuries in Ireland," presented by Sir HAMAR GREENWOOD; supported by Mr. Denis Henry and Mr. D. M. Wilson; to be read a Second time To-morrow, and to be printed. [Bill 166.]

PUBLIC LIBRARIES (IRELAND) BILL.

Reported, with Amendments, from Standing Committee A.

Report to lie upon the Table, and to be printed. [No. 146.]

Minutes of the Proceedings of the Standing Committee to be printed. [No. 146.]

Bill, as amended (in the Standing Committee), to be taken into consideration upon Thursday, and to be printed. [Bill 167.]

SHERIFFS (IRELAND) BILL.

Reported, with Amendments, from Standing Committee A.

Report to lie upon the Table, and to be printed. [No. 147.]

Minutes of the Proceedings of the Standing Committee to be printed. [No. 147.]

Bill, as amended (in the Standing Committee), to be taken into consideration upon Thursday, and to be printed. [Bill 168.]

WEARDALE AND CONSETT WATER BILL [Lords],

Reported, with Amendments; Report to lie upon the Table, and to be printed.

PRIVATE BILLS (GROUP F),

Sir EDWARD NICHOLL reported from the Committee on Group F of Private Bills; That, for the convenience of parties, the Committee had adjourned till Thursday, at Five of the clock.

Report to lie upon the Table.

MESSAGE FROM THE LORDS,

That they have agreed to,—

County Councils Association Expenses (Amendment) Bill,

Marriages Provisional Order Bill,

Local Government (Ireland) Pro-visional Orders (No. 2) Bill,

Pilotage Provisional Orders (No. 1) Bill,

Pilotage Provisional Orders (No. 2) Bill,

Gas Provisional Orders Bill, without Amendment.

That they have passed a Bill, intituled,

"An Act to dissolve the marriage of William Frank Osborne, of 18, Clifton Crescent, in the county of the city of Belfast, in Ireland, journalist, with Arabella Carmichael Osborne his now wife, and to enable him to marry again; and for other purposes." [Osborne's Divorce Bill [Lords. ]

Osborne's Divorce Bill [Lords],

Read the first time; to be read a second time.

Lever Brothers (Wharves and Railway) Bill [Lords],

Reported, with Amendments; Report to lie upon the Table, and to be printed.

Local Authorities (Payment of Expenses, &c.) Bill,

Adjourned Debate on Second Reading [15th June] to be resumed upon Tuesday next.

Official Secrets Bill [Lords],

Read the first time; to be read a second time upon Monday next, and to be printed. [Bill 169.]

Maintenance Orders (Facilities for Enforcement) Bill [Lords],

Read the first time; to be read a second time upon Monday next, and to be printed. [Bill 170.]

Census Bill [Lords],

Read the first time; to be read a second time upon Monday next, and to be printed. [Bill 171.]

Orders of the Day — FINANCE BILL.

Considered in Committee. [Progress, 11th July. ]

[Mr. WHITLEY in the Chair.]

Orders of the Day — CORPORATION PROFITS TAX.

CLATSE 44.— (Charge of Corporation Profits Tax.)

(1) Subject as provided in this Act there shall be charged, levied and paid on all profits being profits to which this Part of this Act applies and which arise in an accounting period ending after the thirty-first day of December, nineteen hundred and nineteen, a duty (in this Act referred to as "Corporation Profits Tax") of an amount equal to five per cent. of those profits:

Provided that—

(a)where the profits are profits arising in an accounting period of twelve months, no tax shall be charged on the first five hundred pounds thereof, and where the profits are profits arising in some shorter accounting period, no tax shall be charged on such amount of the profits as bears to five hundred pounds the same proportion as the shorter accounting period bears to twelve months; and

(b)the amount of tax payable in respect of the profits of a British company for any accounting period shall in no case exceed the amount represented by ten per cent. of the balance of the profits of that period estimated in accordance with the provisions of this Part of this Act, after deducting from the amount of those profits any interest or dividends actually paid out of those profits at a fixed rate on any debentures, debenture stock, preference shares (being shares which do not confer on the holders thereof any right to participate in profits beyond the right to receive dividends at the fixed rate) or permanent loan issued before the twentieth day of April, nineteen hundred and twenty.

(2)The profits to which this Part of this Act applies are, subject as hereinafter provided, the following, that is to say:—

(a)the profits of a British company carying, on any trade or business, or any undertaking of a similar character, including the holding of investments:

(b)the profits of a foreign company carrying on in the United Kingdom any trade or business, or any undertaking of a similar character, so far as those profits arise in the United Kingdom.

(3)In this Part of this Act—

The expression "company" means any body corporate so constituted that the liability of its members is limited:

The expression "British company" means any company incorporated by or under the laws of the United Kingdom:

The expression "foreign company" means any company which is not a British company:

The expression "permanent loan" means a loan of a permanent character which is secured by mortgage or debentures or otherwise on the assets or income of a company and which, if subject to repayment, is subject to repayment at not less than three months' notice.

Mr. WATERSON: I desire, Mr. Whitley, to raise a point of Order, of which I have given you intimation, as to your ruling upon the Amendments standing on the Order Paper. I should like to ask whether, if the decision of the Committee be given in favour of or against the Amendment standing in the name of my hon. Friend the Member for Linlithgow (Mr. Kidd), it will rule out three or four other Amendments, and two, in particular, standing in the name of several hon. Members on this side of the Committee, which seek to except societies registered under the Industrial and Industrial Societies Act, 1893? I should be glad of your ruling on this, because it will guide us as to whether it will be possible to take a Debate on the whole subject upon the first Amendment, and thus to save Debate on the Amendments which follow.

The CHAIRMAN: I understand from the hon. Member that the Amendment standing first on the Order Paper does not cover the whole of the points he wishes to submit to the Committee. If that is the case, I would propose that the whole of the discussion should be taken on the first Amendment, and then, if in the course of the Debate it appears that a separate Division is desired on a subsequent Amendment, I would find an opportunity for that subsequent Division. It would be better not to divide the discussion into two parts, and I will see that the hon. Member has an opportunity of putting his case clearly on the first Amendment, which is now going to be moved.

Mr. PRETYMAN: Does that apply to all the Amendments?

The CHAIRMAN: No, I am dealing here only with the Amendments affecting co-operative and similar societies.

4.0 P.M.

Mr. KIDD: I beg to move, in Subsection (1), after the word "that" {"Provided that"], to insert the words
(a)where the profits are profits or surplus arising from the trading with its own members of a society registered under the Industrial and Provident Societies Acts no tax shall be charged.
This Amendment is directed against a proposal of the Chancellor of the Exchequer which, since it was last discussed in the House, has been very seriously canvased. We had hoped that the right hon. Gentleman would have been persuaded that his proposition would not result in any financial benefit, and that it was politically unwise. He has not, however, abandoned the proposal, and, therefore, it is necessary for me somewhat critically to examine it from every point of view. I know that such an examination is not a necessity to many hon. Members, but there may be, more particularly on this side of the Committee, those who have not had an opportunity of studying closely the co-operative movement, and who, therefore, might readily mistake the proposition of the right hon. Gentleman for a very plausible one. Those who have not much acquaintance with co-operative societies have no desire, I know, to be otherwise than eminently just to those societies, exactly in the same way as we who support this Amendment have no desire to ask for any particular privilege or any particular exemption for the co-operative movement as against any individual or any other section of the community. The right hon. Gentleman and those who are with me are agreed on one point, namely, that the Corporation Profits Tax, which he is introducing for the first time in this Finance Bill, is a tax the liability to which depends upon whether profit is earned. Profit earning is the test of liability for this new tax. I suggest, and I leave it to the right hon. Gentleman to discover whether there is any disagreement between us, that, on his own showing in the later part of the Finance Bill, he acknowledges that the surplus resulting from the trading of a co-operative society with its individual Members is not a profit in the right sense of the word, but really represents
a surplus of economy. I say that there is comparative agreement between us upon that also, because, later on, the right hon. Gentleman proposes to provide that that portion of the surplus which is paid away as what are called cash dividends—although that is a misnomer—is not to bear the tax, but only that part which is retained. I would ask him, how is it possible to distinguish between these two parts of the same whole in the way. he proposes?
It seems to me that the cause of all this trouble is the persistent hanging on to the confusion between the company on the one hand and the co-operative society on the other. I have no desire to traverse the ground over which I went on the Second Reading of the Bill, but it seems to me to be necessary on this occasion to emphasise, not the difference in degree, but the essential and eternal difference in kind, between the functions of a co-operative society, on the one hand, and of a company on the other. On the last occasion I tried to describe it by saying that the co-operative society existed for the avoidance of loss, while the company existed, on the other hand, for the creation of profit. I hope the Chancellor of the Exchequer does not suspect me of attempting anything like an exercise in Scottish metaphysics when I seek to make that distinction, but the more one examines the position the more one realises that the real difference between the society and the company is nothing else than the difference between minus and plus. The history of the co-operative movement is very well understood. In the last discussion an hon. Member opposite used a very happy illustration. He took the case of a wealthy man who did not buy his tea, as many a worker does, in two-ounce or four-ounce packets, but, with his greater means, could go into Mincing Lane and buy a chest of tea. The mere fact that he possessed the control of money gave him an advantage in buying which was expressed in an economy. That man of means, who can so make his purchases, does not, and never did, pay tax on the economy effected. What is sought in the co-operative society is not to gain an advantage for the society qua society, and certainly not to gain an advantage over an individual. The object is simply and solely to secure that the poorer members of the society shall be able to
enjoy, through the power of purchasing as a group before distribution, the same economies which are available to the wealthier man. It is not unnatural, having in view the beginning of the co-operative movement, to find the natural home of co-operation in the friendly society movement. Those of us who have had to do with friendly societies know that on the one hand the friendly society is not an eleemosynary organisation, while on the other hand it is not a profit-earning organisation. Inasmuch as the co-operative society satisfied both these conditions, on the one hand was not a charity and on the other hand was not a profit-earning concern, it was very easy for it to find its home in the friendly societies movement. While they had that common ground one can without undue refinement readily distinguish between the functions of a friendly society and the functions of a co-operative society, and the mere fact that the co-operative society was bound to have a large volume of trade, trading as it did with the bulk of the population, justified Lord Beaconsfield in finding it a home in a separate Act of Parliament by itself. That Act of Parliament is the Act of 1876. I hope that since the last time I spoke in the House on this matter, the right hon. Gentleman has taken the trouble not merely to look at the original Act but to study it, and to follow the extraordinary refinement shown there as to how far you can legally or equitably or justly tax a co-operative society and wherein you could not so tax it. Mr. Disraeli took the heritable property as representing a platform on which the society would conduct its operations. The platform itself was to be subject to Income Tax under Schedule A. When it came to the operations conducted on that platform, inasmuch as those operations only represented, strictly, the mutuality of trading, inasmuch as those operations were only the operations whereby the group, acting as purchasing agents, could effect the economies of the wealthy man, those operations could not admit of a profit, and therefore they escaped all the Income Tax.
Hon. Members may say that dividend is paid. Why is it paid? The co-operative society is not like the Army and Navy Stores, nor like your mutual trading societies dealing with the wealthier portion of the community. The co-operative
societies deal with poorer people, and if these poorer people prefer to adopt a policy of thrift by paying higher prices for their goods now instead of cutting the price to rock bottom and then having a surplus as dividend at the quarter's end, what interest is that of the Treasury's? Those who are wealthy may laugh at the expedient, but it is a very happy expedient to be taken by people who have to count every penny of every shilling and every shilling of every pound. What is more, it is an expedient which has done more to encourage thrift in this country than any other expedient that you or I know. It is an expedient whereby many a landlord has received his rent, which otherwise would have fallen behind; it is an expedient whereby in olden days the doctor's bill was paid; it is an expedient whereby the school fees were often paid. My point is, it is a matter of indifference to the Treasury whether these co-operators cut their prices to rock bottom and take their economy by way of cheaper goods or pay a bigger price for the goods and take their economy by way of the return of a surplus at the end of the quarter.
To test the tenability of the right hon. Gentleman's position, I offer him this illustration: Suppose he presses the imposition of this Corporation Profits Tax upon co-operative societies, whose surplus he himself admits is not a profit. Then the tax can be evaded, as it will be evaded, by the mutual trading societies representing the wealthier portion of the community. The Army and Navy Stores can escape this tax to-morrow. They can cut their goods to the lowest possible price. Their clientele are not attracted by a return of surplus, they are more attracted by instant cheapness of goods, and by pursuing a policy of instant cheapness of goods, the Army and Navy Stores can avoid that so-called profit, that so-called surplus, front which the right hon. Gentleman would recover his tax. The co-operative societies, I grant you, can pursue the same policy. They can cut their prices and thereby defeat the right hon. Gentleman. I put it to this Committee, is it not au absurdity in the way of taxation that a tax is to be imposed which can be avoided and avoided not by some illegal evasion, but by the exercise by the society of its perfectly legitimate rights, and in the way of best realising its mission? After all is said and done, the co-operative society would best realise its mission in that way;
but my objection to it is this, the big clientele of which the co-operative society movement is constituted would suffer a distinct disadvantage by being compelled to pursue this particular policy. The co-operative society movement, which is a movement which ought to be encouraged, would suffer a distinct damage in its prestige if it were compelled to change its present method and to adopt the other methods to which I have referred. I ask this Committee, however, to agree with me that it is a matter of indifference to the Treasury what particular line is followed in a co-operative society movement. The surplus shown is no profit. The tax to be imposed is to be imposed in respect of profit. Therefore you have the simple syllogism that the co-operative society is not liable to tax. I know I have certain difficulties to meet in the way of objection that might be offered against my argument. On the last occasion an argument which appealed somewhat to the right hon. Gentleman—an argument, I think, of the hon. Member for Camlachie (Sir H. Mackinder)—was that it was impossible to distinguish between the reserves of a company trading for profit and the reserves of a co-operative society, and that, therefore, as the right hon. Gentleman only proposed to tax the reserves, his proposal was perfectly legitimate. But I submit that on that occasion a comparison was attempted between things that are actually not comparable. There was a contrast between the reserve surplus of a co-operative society, which is a spending institution, and the reserves which are drawn from profit earned by a profit-earning institution. The real comparison ought to have been made between the surplus of economy of the co-operative society and the surplus of economy of an individual spending or of any other group spending. Let me illustrate my argument by a simple illustration. I will take the case of the right hon. Gentleman's tailor. Making every allowance for the excellent figure he has got to clothe, he must be a very excellent tailor. Now, suppose the right hon. Gentleman has a notion, either from a sense of humour or in a spirit of emulation, to change his tailor to the one who, I believe, is patronised by the Under-Secretary of the Board of Trade. I believe the Chancellor of the Exchequer would then effect a very distinct economy.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain): I ought to get it free after that.

Mr. KIDD: I think my illustration was amply justified. The right hon. Gentleman himself realises the possibilities of economies to be effected in that way, and he himself, despite his anxiety to gather in taxes, would be the first man to resent any attempt to tax the economy effected. Suppose he devotes the difference between, let me say, twenty guineas and four guineas, to replenishing his wardrobe, which, with a change of tailor, might be very necessary, then he would be doing with his reserve precisely what the co-operative society does with its reserve. He would still be engaged in a spending operation. By his first operation he would effect an economy as against his previous practice, just as, in the same way, the co-operative society, by its group buying, is effecting an economy against the previous practice of buying by individuals; and inasmuch as the right hon. Gentleman, in devoting his economy to an expansion of his wardrobe, would still be pursuing a spending operation, so it would be with the reserve of the co-operative society devoted to an addition to stock. I only mention that to convince the Committee that there is not a scintilla of justification for distinguishing between the part of the surplus paid away as dividend and the part of the surplus retained as reserve. I am only too sympathetic with the right hon. Gentleman's arduous work at this time—he will have my support nine times out of ten in the course of these Debates—but, sympathetic as I am with him, and admiring as I do the magnificent courage he is showing at this difficult time, I cannot but feel that he is making a mistake, both financially and politically, in struggling to impose this Corporation Tax upon any part of the co-operative surplus. There is one other argument that I may be faced with. It may be said the co-operative societies are not merely distributing, but are manufacturing agencies; but surely you can have a spending operation which is not necessarily in a straight line. Suppose my wife, instead of going to the baker to buy her bread, buys flour and makes her bread at home. The economy effected is not the occasion for imposing on me a tax for that economy. Supposing a co-
operative society buy a farm and raise their own grain to feed their own cattle, which are to be distributed to their own members. All that is simply a spending operation.

Mr. C. PALMER: They are competing with the butcher, who has to pay Income Tax.

Mr. KIDD: I have a big enough job without undertaking the colossal task of instructing the hon. Member in elementary economics. I have spent the last twenty minutes or so in trying to distinguish between the functions of a spending organisation and of a creating organisation, and I have sought to illustrate it with the mathematical symbols of minus and plus. Let me try one other illustration, and I shall feel happy if I redeem this particular soul. I am dealing with the co-operative society, which is really a workers' organisation. I have shown that it has had its mandate, or its charter, from Mr. Disraeli, and I have tried to show the extraordinary care taken to give no privilege and no particular favour, but the exhaustion of the possibilities of law to secure fairness, not for one section, but for all sections of the community, as having been the policy which guided him—the same statesman who gave the charter to the trade union movement. Supposing the trade union movement ceases to remain any longer in its crude stage and advances to the position of being an investing unit in the creation of wealth, then you will have the definite correlatives in the spending group and the creating group, and the statesman who gave the charter to both intended that to be the final achievement of each. There you have, so to speak, in the domain of economics the equivalent of the negative and the positive in the domain of electricity, and if your organisation is a spending organisation to begin with, if it confines its operations entirely to its own members—and my Amendment is directed simply to such operations—then it is a spending operation to begin with, it is a spending operation throughout, and whatever loops you may find upon the line, you cannot distinguish any action in this proceeding as being otherwise than of a spending nature. 1 know that on this side of the Committee some Members may hesitate to support
me because they see in the co-operative movement a promise of the ultimate realisation of the socialistic state. The man who can discover in the co-operative movement any promise of socialism is the kind of man who thinks he is looking west when he is really looking east. The co-operative movement is diametrically opposed to socialism, and the man who thinks otherwise suffers from the malady of partial vision, and that vision is never so partial as when it is directed to economies, the most elusive of sciences. Therefore I hope no Member of this House will believe for a moment that, somehow or other, in the process of spending, we can discover the socialistic state. You must make the money before you spend it, and the socialistic state cannot come by the spending side.
There is the man who thinks that by exempting the co-operative societies you are doing an injustice to the small trader. I share the admiration held by most people for that class of society, the small tradesmen, and I would not ask for the Amendment if I felt that I was doing any injustice to the small trader. Those who oppose my Amendment are the enemies of the small trader. Let us suppose that, by imposing this tax, you compel the co-perative societies against their will, as you will compel them, not to run their businesses as they do at present, but to under-cut and sell at rock-bottom prices. What then becomes of your small trader? Think of the co-operative society, with its volume of wealth, its cash trade within the ambit of its own members—think of that as against the small trader with his limited means. Why, the small trader would go under, and therefore the man who is out to support the small trader should, if he is consistent, support this Amendment. Some people think that the only reasonable way out of our present difficulties would be a levy on capital. Many of us who I regret to say would not have been affected by that levy were in agreement with the right hon. Gentleman when he refused to adopt it, inasmuch as it would disorganise the industries of the country. If that was to be said of a levy on capital, what is to be said of a levy on the economies affected by the poorer people in our country? I would desire to make reference to the fact that the co-operative societies embody not hundreds or thousands, nor tens of thousands, but millions. I never was
seriously affected by the cry of the crowd for a levy on capital. I do not worry about the crowd, because I find that they are so often wrong, but when I find a volume of people, millions of thrifty people instinctively feeling that in this tax an injustice has been done to them, however inarticulate they may be, they know their instincts are sound, they know that this tax is a tax which ought not to be applied to them, and I should be acting foolishly if I were not influenced by the consideration that only a very extreme case would justify the outraging of those instincts.
We have had a campaign on behalf of thrift. The co-operative society in one day has achieved more in the way of thrift than a thrift campaign conducted for the whole period of this Parliament's existence, and yet at the very time thrift and greater social energy is being preached you come along with a tax based on a profit earned, you admit that the surplus of the co-operative society is not a profit, and yet you propose to take part of that surplus and tax it simply because that part is put into stock in order to effect yet more economies in the spending operation. I want to make a reference to that wretched Minority Report. I see some Gentlemen opposite who are responsible for it. I want to speak kindly about it, but I want to acknowledge that it has proved a great temptation to the Chancellor of the Exchequer. There is a wonderful page in that Report, where the mistake made is that it is stated if a Corporation Tax were introduced into this country similar to that in America, it might be applied to co-operative societies. But in the very next paragraph the writer proceeds to demonstrate that the surplus of a co-operative society is not a profit. The genius who wrote that Report did not know what the Corporation Tax in America was. He was discussing something of which he was ignorant. You will find that he did not think the Corporation Tax was based on a profit, as it is, that he had in view that the Corporation Tax was something in the nature of a licence to enjoy limited liability in trading.

Mr. PALMER: Twelve people signed it.

Mr. KIDD: I shall not give the hon. Member further attention until he takes his seat on the Treasury Bench, and that
will be some time. With reference to that Report, I am going to make this appeal to the Chancellor of the Exchequer. The Report was, I believe, written by a Professor of Political Economy. The right hon. Gentleman may recall the words of his distinguished father, when twelve of these Gentleman opposed his proposals on the Fiscal Question. "Oh," he said, "they must oppose. It would make them rewrite their lectures." I ask him to agree that it would be unfair to accept that Report. We are not concerned with any apprehension or misapprehension of the man or men responsible for that Report. We are simply concerned with the meaning attached to the Corporation Tax by the right hon. Gentleman himself. That meaning is this: that the tax is only to be imposed on profit earned. He agrees that the surplus of the co-operative society is not a profit. I submit that it follows naturally that his position is indefensible when he seeks to attach a Corporation Tax to any part of the surplus of the co-operative society. I beg to express the hope that, for reasons that are sufficiently serious and sufficiently sound, economically and politically, the right hon. Gentleman, even at this last moment, will consider whether he can adopt my proposal, but whether he does or does not, I now beg to move it.

Mr. WATERSON: The House has listened to a very excellent speech made with a great amount of enthusiasm and which I believe came from the depths of the hon. Member's heart. I take this opportunity on behalf of those whom I represent to thank him for putting the case so eloquently as he has done, but I submit that the Amendment does not go far enough. If this Corporation Tax is applied to the co-operative movement, it will dispense with the principle of mutality. I am not yet convinced that the Chancellor of the Exchequer is taking the right steps in bringing this Act into operation, as far as those under the Industrial and Provident Societies Acts are concerned. It is an illegal Act, in the first instance, and if it is to be applied it will be necessary to amend the existing laws before this Corporation Tax can be made legal, as far as co-operative societies are concerned. The law as it stands to-day recognises that the principle of mutality profits are not assessable to tax, or, rather, that the surplus is not assess-
able to tax. The right hon. Gentleman is creating a new precedent. Previous Chancellors have stood by this main principle of mutality and have regarded the fact that in the co-operative movement, where this principle exists, there cannot be any profits. It is merely surplus that is handed back to the members through the principle of mutual co-operation. I am not here to defend those companies that would come within the scope of the Companies Act. There are men in this House well able to put their point of view. We had an illustration of those interests in the Debate yesterday. Nevertheless, the societies that form the co-operative movement are registered, not under the Limited Liability Acts, but under the Industrial and Provident Societies Acts. I want to draw attention to the fact that the organisations that work under the Industrial Acts are hampered, that their hands are tied, because they have not the facilities allowed to them which are allowed to any company in this country. I mentioned on the Second Reading that I had previously asked the present Chancellor of the Exchequer on two specific occasions if he was prepared to remove that £200 limit. He has declined to do it. I am not going to say whether his wisdom is just or whether it is false. That is his own business. Nevertheless, the position is this: No individual shareholder who comes under the scope of the Industrial Act is allowed to have more than £200. That is the limit. But in the Companies Acts it is vastly different. If you are going to apply the same law to industrial and co-operative societies, give them the same facilities and the same opportunities that are given to limited liability companies that come under the scope of the Companies Acts. Then our interest on shares is limited. We are compelled to pay only a specific amount of interest, and not to extend beyond it. Under the Companies Acts it is not so. Why should this be imposed upon the co-operative movement if you are anxious that the same tax should be applied to the co-operative movement as you desire to place upon limited companies? These are one or two anomalies which would have to be removed to give us the same opportunities to develop our machinery as companies are allowed with these things that I have mentioned.
There is another important factor of which I am afraid the Chancellor of the
Exchequer has lost sight. The members who form a company have not control over it like the members of an ordinary co-operative society. We have our members' meetings quarterly or half-yearly, according to the local situation, as the local members desire, and those members are the controlling factors. That is vastly different from those that come under the scope of the Companies' Acts. Then again a company exists for the specific object of making profit out of the community, but co-operative societies do not exist to make profits or even surpluses out of the community. They exist for the principle of mutuality between all who are members of the organisation. The amount of their capital is fixed by their Articles. The door of the co-operative movement is open to every individual in the community, but we do not find that in the case of companies. They are limited; we are not. Our doors are open. The reserve funds of a limited company go to enhance the selling value of their shares, but anyone can procure shares in a co-operative society. A man is as good a member when he only holds £1 share as a man who holds £200—the same opportunities, the same facilities, the same amount of votes at a members' meeting. I notice that the Income Tax Commissioners' Report says:
We recommend in effect that a society shall be treated exactly as a limited liability company trading in similar circumstances and under similar conditions, and if our proposals are acted upon, it will be necessary to amend the existing law in so far as it affects special exemptions of co-operative societies.
When I read that I endeavoured, with the small intelligence that I possess, to make the best of it, and my interpretation of it is that the law first of all does not allow us to have facilities as an ordinary trading company; and secondly, how can a limited company by any possible stretch of imagination ever trade in similar circumstances to a cooperative society? As soon as ever a limited liability company trades in similar circumstances to a co-operative society, it has become defunct as a limited liability company, and as soon as ever a co-operative society works on the same lines as a company, it becomes a company and its co-operation is completely extinct. It is impossible for the two to be brought together. We cannot trade under the same conditions and the same circum-
stances. As soon as a limited liability company makes of its traders—those that trade with it—whether it be retail establishments or even wholesale societies, part-owners and part controllers, it loses its identity as a company. As soon as a co-operative society trades on the same basis as a company, it loses its identity with the policy and principles of co-operation. There is a vast difference between the two. They are two distinct ideals, two distinct objects and aims, and two distinct heavens to reach. They cannot be treated in the same way. I fail to see, with the intelligence that I possess, that it is possible even to put that portion of the Report into operation.
There has been, in the course of previous Debates, a question as to the relationship between the wholesaler, the productive, and the retail. I submit these three points. The wholesale society of the co-operative movement exists exclusively to serve the retail, the productive produces on the principle of mutuality to make economies in the interest of those members who are affected thereby, and the retail exists for the specific purpose of supplying the goods which are produced, and what the wholesaler has been able to secure in order that the consumers and members may benefit thereby. It has been said that the co-operative movement pays no taxation. That statement is in its entirety a fallacy. Is anyone prepared to suggest that we do not pay taxation under Schedule A and Schedule B? I know we do not come under Schedules C and D. If we did, there would be an opportunity of reclaiming things that we cannot reclaim at present. We should be able to reclaim a certain amount of taxes which have been paid. Therefore, the State has an advantage over us in that respect. People speak of reserves in the co-operative movement as if we had a deep cellar filled with gold or John Bradburys, and all we had to do was to order it and it would come. That is not so. The reserves of the co-operative movement are mostly held in stock. I do not mean altogether stocks in War Loan, but stocks in the various businesses of the society—the various retail societies and the wholesale. That reserve is not the society's; it is the members'. We naturally trade on that by the principle of mutuality, in order that we may benefit thereby, and once by law enact a measure which will be detrimental to the principle of mutual
trade and you will be acting in a manner detrimental to the country as a whole. The hon. Member (Mr. Kidd) mentioned thrift. Would the Chancellor of the Exchequer suggest that members of the co-operative movement are not thrifty? Would he not rather suggest that they have done more for the good of the community than any other society that there is?
I am reminded of this by an interjection that the hon. Member (Mr. Palmer) made. He said, "You do not pay any Income Tax," or words to that effect. "You are competing with the butcher." Income Tax is vastly different from a Corporation Tax in its application. Income Tax is on earnings. If this Corporation Tax, as applied, will be a tax on savings and economy, and if it is to be applied to the savings of every individual, irrespective of whether they trade, all individuals who have, by dint of perseverance, or shall I. say by intelligence, saved anything, would be liable to this tax. I am reminded of this by my own experience. There was a time when I paid rent for a six-roomed cottage to a landlord who fetched it every week. I do not know whether I can call myself in a better financial position today, but I happen to live in a house that is partly my own We will say it is paid for and is my own. What does it amount to? Are you going to tax me on my economy because I have been able to buy. my own house and saved an amount of money which would otherwise have been paid to the landlord? Are you going to apply the Corporation Tax to the individual on the economies that he makes? Let me give another illustration that forces itself on my mind. I see many hon. Members driving through Palace Yard in their cars. There may come a time—I hope it does not—when they will feel the necessity of dispensing with the man who drives the car, and they will drive it themselves. Is it assumed by the Chancellor of the Exchequer that he is going to apply the tax to the economy that such a man has made?

Sir OWEN PHILIPPS: You should pay Income Tax on your house now

Mr. WATERSON: Probably I have not made it quite plain. I will endeavour to explain it again. If I pay rent every week to a landlord, when I have lived in a house 40 or 50 years I have paid
over and over again for the cost of the house, but if I buy the house straight away I effect an economy. I suggest that if this Corporation Tax is to be applied I have a right to have it applied on the economy I have made by purchasing my own residence. That is logical. It is an economy; it is a saving; and if the tax is applied, it is a blow at thrift However, I will not pursue the argument. It is exceedingly plain to me as far as my experience goes. Perhaps the Committee will allow me to give a better illustration, which I take from the evidence put before the Royal Commission. It is in the fifth instalment of the Report. It is the case of a convalescent home run by a co-operative society in the North. The North Western Convalescent Homes Association have two homes, and the shares held by the societies in these homes are almost £24,000. No interest is paid on the shares, by common agreement. In 1916 the accounts showed a surplus of £56, in 1917 a loss of £698, and in 1918 a loss of £169, and in each of these years tax was paid under Schedule A, amounting in 1916 to £93 12s. 6d., in 1917 to £93 12s. 6d., and in 1918 to £112 7s. Here is an organisation that exists for the principle of mutuality which has to pay a tax. If we had come under the Companies Act we should have been able to reclaim.
The surplus of the co-operative movement is at the discretion of members of the co-operative societies. The members decide how that surplus is to be disposed of. They can give it away or they can buy War Loan with it; they could give it to the Chancellor of the Exchequer towards reducing the National Debt or they could devote it to charity, education, or any object that had the consent of the members. I would ask hon. Members to read the fifth instalment of the Royal Commission's Report, which deals with the question of the reserves of the co-operative movement. I do not pretend to say that we have not these reserves, but I do say that the reserves belong to the members. If I lent a co-operative society £50 or £100 I should get 5 per cent. interest. The society might utilise it and turn it into wholesale, and get 6 per cent., so that the retail society only gets the advantage of 1 per cent. By this Corporation Profits Tax you want to impose a 5 per cent. tax on that £1. it is a bad proposition. Would it be too
much to say that it is due to a lack of understanding of the co-operative movement, and a lack of appreciation of that for which the co-operative movement stands? On the Second Reading of the Bill I dealt with the question of this tax so far as America is concerned, and my hon. Friend the Member for Chelmsford (Mr. Pretyman) on the following day failed to see how I could read into this Corporation Profits Tax the meaning of mutuality. I have gone into this matter a little further. The Corporation Profits Tax applies to
associations organised and operated exclusively for the mutual benefit of their members.
Section 120 of the American Income Tax Law, paragraph 18, defines as non-taxable organisations the following:
Farmers, fruit-growers or like associations or co-operative societies, organised and operated as sales agents for the purpose of marketing the products of members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produce furnished by them, or as purchasing agents for the purpose of supplying merchandise to members at cost, including the necessary expense.
Having been able to get that quotation from the law in operation in America, I hope that I have convinced the Committee that the Corporation Profits Tax is not applied to the co-operative movement in America. The Chancellor of the Exchequer rather refuted this argument when the deputation met him some weeks ago, and I feel more encouraged by this production of further evidence, and hope the Chancellor of the Exchequer has gone into the question a little more fully since the deputation met him. The Committee may ask upon what right and upon what basis does a deputation from the co-operative movement meet the Chancellor of the Exchequer? We are not the only deputation that has met the Chancellor of the Exchequer.

Mr. CHAMBERLAIN: Hear, hear!

Mr. WATERSON: I have here a quotation from a speech made by the Chairman of the Manchester Branch of the Federation of British Industries. He says:
We have had two meetings with the Chancellor of the Exchequer. If we do not get our way at this present moment we are going to have it, and we are assured by the Government that we are the people who are going to be called in to advise.
The Chancellor of the Exchequer is going to be compelled to have these gentlemen to advise him
and that our advice will be most carefully and thoroughly considered.
I hope the Chancellor of the Exchequer will remember that. I submit that this tax is a blow to the co-operative movement and is a deep and decisive blow against social development. I honestly believe that it is a denial of the principle of British law. It is abrogating a law as it now stands on the Statute Book which has been in existence ever since the co-operative movement had any recognition. It is the time to say—I believe the Committee will appreciate it more if I say what I am about to say in this House rather than on a public platform—that there are instigators at the back of this movement against co-operative societies, and that this House is being used as their happy hunting-ground. The Commission only had one day in which to deal with the evidence put forward by the co-operative movement, and after that this tax is proposed for the specific purpose of trying to strike a blow at the co-operative movement, The case was put against co-operation by 12 separate trading organisations. If hon. Members would read the evidence, as I have done, they might think from the statement of these people that they are absolutely controlling industry over more than two-thirds of the whole of Europe. From the case as submitted by them they might have represented more than half of Europe.
What about the reservation? I am not going to try to defend my hon. Friend the Member for Edinburgh (Mr. W. Graham). The Committee will appreciate his ability to defend himself, but I suggest that that reservation was done between the morning Session and the afternoon Session. [HON. MEMBERS: "At lunch time!"] It may have been done at lunch. Things are done at the luncheon table much to the detriment of this House and the detriment of the country. This reservation to which my hon. Friend attached his name was done between the morning and the afternoon Session, particularly because the Chancellor of the Exchequer was anxious to get the whole business over in order that he might draft his proposals for the Finance Bill. I am not going to minimise the difficulties of the Chancellor of the
Exchequer. No man who has any sense of citizenship and who appreciate his country as he ought to appreciate it can fail to recognise my right hon. Friend's difficulties. Money has to be got, but may I remind him that in this Budget £58,000,000 are going to be got by indirect taxation, and that that £58,000,000 is to come out of these people upon whom you are going to impose this tax. These people, in addition, pay their Income Tax which is due by statutory authority. You are also asking for £11,000,000 for postage and stamp duties, £17,000,000 for Supertax and Excess Profits Duty. Indirect taxation has always been the burden of the working classes of this country, but land is to go free. The land duties are to be taken off. The Government says that taxation of war fortunes is exceedingly unwise, and that it would be impracticable to adopt a capital levy. There is no objection so far as many hon. Members are concerned to taxing the working classes twice over, and to penalising them because of their thrift, because of their desire to study economy and, by their sense of citizenship, to build a nation worthy of the name. You are going to tax the savings of working men and working women—hundreds of thousands of them, and if this tax is applied you will have hundreds of thousands of reclaims to contend with. The right hon. Gentleman says that he will only get £175,000 from this tax, and I ask him to recognise the number of reclaims and the cost of the country in getting the rights of these men and women to their reclaims.
Apparently the Government is prepared to make a rod for its own back. I ask the right hon. Gentleman to reconsider the whole question. I believe that this is a wicked travesty of justice, and when truly understood the people will weigh the Government in the balance and find that they are wanting. May I appeal to the Members of the Treasury Bench to take the Whips off on this question and to give us a free House. There are many Members of the Government who would pledge themselves to support the removal of this tax if they had a free vote. There is nothing vital to the existence of the Government in this Amendment. It would not be regarded in the country as the fall of the Government. Many Members of the Government feel that if the Whips were taken off their hands would
be untied and they could vote as they desired. I ask the Government to deal with this question fairly and squarely, and not only to take the Whips off, but to remove a Clause which is manifestly unjust and against the statute law of the country.

5.0 P.M.

Mr. CHAMBERLAIN: I have listened carefully, with much sympathy, and with a large measure of agreement, to what was said by the hon. Member who moved the Amendment, and with much that was said by my hon. Friend who has just sat down, until he came to his rather lengthy peroration. I do not think that he gains anything, or that any hon. Member gains anything, by adopting a tone of extreme exaggeration, and I am sure they gain nothing by imputing to their opponents motives which they would disavow in themselves, or which are subject to improper inferences. The hon. Member said something about pressure having been put upon Members by those who think that the co-operative societies ought to be subject to this tax or another tax. Have there been no representations from co-operative societies? Has there be no attempt to bring organised pressure to bear upon hon. Members and to persuade them if possible, to intimidate them if persuasion was impossible, into giving a particular vote? Let us leave that outside in the Lobby or, better still, outside the House altogether, and let us confine ourselves to the merits or the question, without exaggeration on the one side or the other, without prejudice and without imputation of motives. I am encouraged to make this appeal, because I believe that the vehement opposition of the two hon. Gentlemen who have spoken arises in part from a misconception of this tax and in part from the misunderstanding which follows directly from that misconception as to the logical consequences of this tax. I do not want to dwell too much upon the signature of the hon. Member for Edinburgh (Mr. Graham) and other Members directly interested in co-operative societies and the reservation contained in the passage which has been the subject of discussion in this House and elsewhere between them and me. When a gentleman, whether a Member of this House or not, tells me that I am im-
puting to his words a sense which he never intended to convey, there is only one course which I can follow. It is to accept his disclaimer, to use the argument, if I think it is a sound one, but not to impute it to him any longer. Therefore, while I do attach importance to the argument of the reservation, I do not want to plead these gentlemen in favour of the particular proposal which I am now making.
Is it too much to say that the members of the co-operative societies, both when dealing with the report of the Commission and again here speaking to us, while they object to the income of their so-called profits or a large part of them being the subject of the Corporation Tax, admit that there may be something which may be properly the subject of some tax? I think not. It was implied in their signature to the reservation, and it was directly admitted by the representatives of the co-operative societies when they came to see me on a deputation. The hon. Member very truly said that that was not the only deputation I received. My life is one long series of deputations. At Budget time they add considerably to my labours. I try as far as I can to disregard that, both for the advantage which I personally receive from the observations or the criticism of the deputation and also out of respect for the great interests which they represent. But I think it is admitted that the operations of co-operative societies might properly be subject to some tax, and a great deal of the opposition aroused by my present proposal is due to the fear that if we adopt it we prejudice a decision upon the Income Tax.
The two decisions are quite separate and must be kept quite separate. The Income Tax is a tax upon individuals. The Corporation Tax is a tax put on a corporation as an entity. It is imposed for various reasons, among others in respect of the privileges which attach to their statutory incorporation. To apply to the tax the arguments which are applicable to Income Tax or to the Income Tax the arguments which are applicable to the Corporation Tax seems to me to apply the same measure to wholly different objects, objects which cannot be measured in the same way. Therefore I say at once for myself that I am very far from drawing the inference which I think both these hon. Gentlemen fear that the
extension of the Corporation Tax to co-operative societies would necessarily or logically be followed by the extension to them of Income Tax on that part of their so-called profits which is not now subject to it. Of course there is a portion of their profits which is liable to Income Tax. They are liable to Income Tax in respect of profits arising from sales to non-members, or income from reserves in stocks and shares or property, or in respect of conventional income calculated on the annual value of property owned and occupied by them, or from the occupation of land, or finally on dividends on purchases from wholesale societies similar to those paid by retailers. I do not think that there is any dispute about that.

Mr. A. WILLIAMS: I do not think that the co-operative societies ever admitted that they can pay on dividends from wholesale societies.

Mr. CHAMBERLAIN: I do not think that that would be disputed, but at any rate the other items are not disputed. The dispute arises in respect of the surplus of profit arising from the transactions with their members. That part of their surplus or profit which is given back to members as their bonus at the end of their accounting period, whatever it may be, instead as a discount on their purchases, we do not propose to tax. It is exempted from the Corporation Tax. That part which they retain in reserve or apply to the other purposes described by the hon. Gentleman (Mr. Waterson)—

Mr. WATERSON: Does the Chancellor understand that these stocks which are continued in reserve are liable to tax?

Mr. CHAMBERLAIN: What is put to reserve is taxed however you put the reserve. You may invest your reserve in stock or stocks and shares.

Mr. WATERSON: The stocks I referred to on that occasion were the stocks in the shop.

Mr. CHAMBERLAIN: You may invest your reserve in many ways—in a Government security, in another industrial undertaking, in buildings or machinery or plant or in stock in trade, but the way in which you invest it does not alter its character, and it is the money which is placed in reserve or the money which is expended on the other purchases, not
being a bonus or discount on purchases, which we propose to render liable to tax.

Mr. MacCALLUM SCOTT: What is it you propose to tax? Is it the actual reserve itself which is capital or is it the income or revenue derived from the reserve?

Mr. CHAMBERLAIN: Neither one nor the other. I am talking of the money which is placed to reserve. That is the surplus of the year. It is not the capital which is already invested.

Mr. SCOTT: I call it an investment.

Mr. CHAMBERLAIN: One difficulty about making these matters clear is that in the habitual language of co-operative societies everything bears a different meaning from what it does in other commercial or industrial undertakings. I think that the meaning of each of these terms is well known to co-operators themselves. But they are not the same as those we attach in other circles. I have tried to show, first, the limited scope covered by the proposed tax, and, second, the profound difference in its nature between this tax, which is a tax on a corporate entity, and Income Tax, which is a tax upon individuals. It is quite true—I say this to prevent it being thought that I overlook it—that we tax the reserve of an ordinary company the full rate of the tax. That is done because you cannot follow up the interests of each individual shareholder and apportion the reserve according to the individual liability to tax of all the different shareholders who have an interest in the reserve.
I do not know whether it is wise to stray beyond the circumstances immediately under discussion, but I am so profoundly convinced from all I have heard that the real apprehension of the co-operative societies is not in regard to the tax which I am proposing, but in regard to the supposed inference with regard to Income Tax to which the imposition of this tax might give rise; that I think I had better say a word or two about my view on Income Tax. It is almost the only question on which the Royal Commission on Income Tax was divided in not unequal proportions. I have read again and again both that section of the report of the Commission and the three reservations, one of which
agrees with the report of the Commission, but for reasons differing from those of the Commission, and two of which dissent from the report of the Commission, but for reasons differing from one another. As far as I am personally concerned, I cannot convince myself that the main report is right on this subject. I think that the reservation is right. The reservation, in the phrase to which I alluded earlier, said that if there were in this country, as there is in the United States of America, a corporation tax levied especially on corporation shareholders, it would no doubt require that co-operative societies should as a separate legal entity remain liable to that tax.
I do not know that the exact practice in America need detain us very long. My information is different from that of the hon. Gentleman. The Corporation Tax is not called a Corporation Tax in America; its exact name I cannot recall at the moment. But liability to that tax in their case is governed by liability to Income Tax. The liability to Income Tax creates the liability to what I will call their Corporation Tax. Their Income Tax is so broad that it does render liable to Income Tax the surplus of the co-operative societies, and therefore brings them within the scope of the Corporation Tax. I do not rest myself upon the American analogy; I rest really upon our Income Tax. In this reservation, whilst admitting that those who signed it are right, that you cannot bring those profits of the co-operative societies within the scope of the Income Tax now broadened, yet the nature of the operation for carrying on by the co-operative societies makes them liable to another tax framed on different principles and measured, not by the individual liberty, but by the corporate earnings or profits. We propose to tax those corporate bodies in respect of the privileges they enjoy. We find it most convenient to asses that tax in the ordinary way upon profits. In my opinion that which is in dispute is, not the profit within the narrow meaning of the Income Tax Act, but it is that which, in the co-operative society, is most analogous to the profit of the ordinary trading companies, and is therefore the best basis in their case on which we can levy the Corporation Tax. It is not because
it is a profit, but because it is the nearest analogous basis which we can find in the co-operative societies.
Let me say one other thing. The co-operative societies have been exempt from Income Tax by law. That exemption has excited a great prejudice against them. I do not think that is to the good. If I may venture to offer a word of advice, or to express an opinion, and an opinion which, though it comes from an outsider, is not an unfriendly opinion, I would say that I think it would be unwise to seek exemption from that which on a fair construction makes their position invidious, appears to render it privileged, and evokes a persistent opposition to their movements from a great number of small people no better off. Coming to Income Tax, I think I would take a bold course, and would come down myself on the Income Tax and move to repeal their exemption by law. I believe that when you repealed the special exemptions by law, if you took them into the courts they would get the exemption, because Income Tax would not be leviable in terms of the Act without that special exemption. I believe that special exemption does alter the term of the law upon them. I am sure that it would not put anyone to a great deal of trouble if the co-operators had adopted the same view and had the courage to act. In any case I have said nothing to show that in what I am suggesting I am not going on the analogy of the Income Tax. I am going not hereafter to plead that, because we have proposed a Corporation Tax, therefore they ought to be subjcet to Income Tax, or because we have taken this so-called profit as the measure for assessing their liability to Corporation Tax, therefore they are profits within the meaning of Income Tax.
I do not know whether what I have said has achieved my object, but, at any rate, I have tried to bring our difference down to what is its true extent, and I hope if I have succeeded in removing some misapprehension, that the difference will be found not to be so serious as the two hon. Gentlemen thought. In any case, I am certain that the proposition, as I have stated it, cannot be very dangerous to the co-operative societies, and it was about that that the hon. Gentleman opposite waxed eloquent in his perora-
tion. It cannot be equitably described as a hostile blow, or as injurious to their activity or interests. I cannot reverse this tax and at the last moment substitute an alternative form, but if this method of assessing and collecting the tax is unfair or inconvenient, I am always ready to consider an alternative. So far, the gentlemen who, by signing the reservation, contemplated the possibility of an alternative, have not suggested what that alternative should be. Under the circumstances I propose to adhere to the proposal in the Corporation Tax, but not from that to draw any inference as to the proper treatment of co-operative societies in relation to Income Tax.

Mr. W. GRAHAM: I must acknowledge first of all the conspicuous fairness with which the Chancellor of the Exchequer has approached this problem throughout. I feel compelled to make special reference to that fairness because of the fact that, with others, I had the opportunity of serving on the Royal Commission and of signing the reservation which has been the subject of such widespread discussion. Let me make it perfectly plain that the proposal which is under discussion is a proposal, as the right hon. Gentleman indicated, covering a very narrow field of co-operative enterprise, at least as far as the fiscal instruments of this country are concerned. Probably most hon. Members will agree that, whatever their views for or against the imposition of a Corporation Tax on any part of the surplus of co-operative societies, this discussion might never have arisen in this country but for one or two facts. The first fact, to which reference was made, I think, by all the Members of the Royal Commission, was that the co-operative movement in Great Britain had made tremendous progress during the last twenty-five, thirty, or fifty years, and that the very progress of that movement, the great ramifications of its trade, the fear that at no distant date it would wipe out all private enterprise, had directed a certain amount of attention to it and had led many of the smaller traders to think that it was gaining an unfair advantage in regard to taxation from year to year, and that they were being penalised to that extent. While these things are true, while the co-operative movement in Great Britain has made tremendous progress, I think the overwhelming
majority of hon. Members will agree that the mere fact of that progress and the growth of the movement does not touch, or should not touch, the principle upon which it proceeds, and that no progress in co-operation can affect to any appreciable extent this narrow question as to whether a Corporation Tax or any other tax should be applied to what is the result, the surplus resulting from what we describe as mutual trading. No doubt the tremendous progress of any movement in any country may give rise to the thought that from the point of view of social and other considerations, of taxation, we must readjust our scheme, we must alter the processes we have adopted so far. I am confining my attention to the bare principle, and I appeal to hon. Members on all sides not to confuse the progress and the development of this movement with the comparatively narrow and restricted principles which we are now discussing.
There is another point, and I want to put it plainly and candidly to the Committee. I daresay all hon. Members are familiar with the ideals of the pioneers. The first ideal was that they were to supply a commodity of the highest possible quality they could produce or obtain for their members. In the second place, they were to supply that commodity at the bedrock price for the benefit of the great mass of the working class population, though the co-operative movement has extended its appeal far beyond that class within the past 20 or 30 years. I am willing to admit, and I have said so here as a warm friend of co-operation, that the co-operative movement has to some extent brought this discussion on its own head by departure from those early ideals. They could have escaped this discussion, I think, if they had paid far less attention to an artificially inflated dividend and more attention to the supply of an article of the highest quality at the bedrock price. That is a criticism not only of opponents of the movement, but a criticism of its idealists and friends as well. These are two of the grounds which are very powerful in this Debate. They were represented in due course before the Royal Commission. They have occasioned a good deal of public discussion of this problem, and undeniably they have influenced the minds of the small traders in the community. They have been the cause of the agitation
and the campaign in recent times to apply Income Tax, or some form of tax, to the surpluses resulting from the mutual trading of co-operative societies. Let me try to make it plain at the same time that I do not believe that private traders will be assisted to any appreciable extent either by a device of this kind or by any action they may adopt, as they think rightly, to penalise the co-operative cause, or at all events to place it in a position which they think it should occupy in the trade and commerce of our land.
In my own constituency—and all hon. Members have this experience—we have a very large number of small traders. I am willing to admit that along with many others I should never have been elected to this House without their support, and I say that for the express purpose of making it plain that we can have no cause whatever for driving these men out of the businesses or the industries which they carry on, but I have discussed this question of the application of the Corporation Profits Tax to any portion of the surplus of a co-operative society and of the application of Income Tax and of other taxes, and I have been greatly impressed by the views to which these men and women have given expression. Their expression of opinion is in part a criticism of the co-operative movement and its methods in Great Britain. There is no doubt that many of the co-operative societies have charged a range of prices which were calculated to bring a certain dividend. They have actually legislated in terms of artificially high prices, in many cases to produce 3s. 6d., or 3s. 8d., or 4s., in one case that I happen to be familiar with in Scotland, 4s. 4d. in the £. I think that is bad business for the great body of consumers, and I think it is economically unjust and wrong. That is my personal view, but I am only describing the system which these societies have adopted, and they have adopted it in many cases to bring that return mainly from the view of attracting to their membership the people who were still outside, using the dividend as a propaganda element in the campaign which they were carrying on. I do not think any critic of co-operation will seek to deny these hard facts, but how have these facts affected the mass of small traders in this country?
The small traders of Great Britain are exposed not merely to the danger or diffi-
culty of the competition of the co-operative movement, but they are exposed to the growing competition of the great multiple shops. I see these small traders tending to perish between two great forces—the multiple shops on the one side, underselling them by the enormous quantities many of them sell, producing these articles and selling them at rates with which the individual man cannot compete; on the other side, the co-operative societies with their enormous membership, in the City of Edinburgh, with a population of 320,000, covering probably not less than 200,000 to 250,000 directly and indirectly. These are striking facts which confront every Member of this Committee. The question is, can these small traders—and they use this argument to a great extent in the discussion of this tax—survive? I do not want to say anything against them, because along with other hon. Members, I have the greatest respect for all their efforts, but I believe they will tend to be crushed out more and more between these two great forces. I think they are going to fall either as a result of the trusts or as a result of co-operation, but let us take their position at the moment. The co-operative societies are practically regulating prices for a considerable number of commodities and consumers in large parts of this country. The private traders say to me, "If we are going to compete, we must get a certain return on the trade we are carrying on, and if you do anything which is going to drive the co-operative movements by a curious paradox, back upon its initial ideals, cut its prices, sell the articles at bed-rock rates, and hand out next to no dividends at all, the propaganda element having gone, then you are not going merely to confer a great benefit on the consumers, but you are going to drive us out of all competition in the ordinary market places in Great Britain." They have told me time and again that they depend, curious as it may appear, on the somewhat artificially high prices which in many districts are charged in the co-operative movement. If you take them away, the private trader perishes, and they have said to me quite candidly that they are not parties to any scheme which is going to penalise co-operation. I think these are very striking facts which deserve being borne carefully in mind, in our analysis of the problem which is now before the Committee.
I want to turn now to the minority statement of the Royal Commission on the
application of the Corporation Profits Tax to the surpluses of co-operative societies. My experience of signing that melancholy reservation has been so difficult and so trying that, as a young and inexperienced Member of this House, I have practically made up my mind never again to serve upon a Royal Commission, not because the work is not interesting and very valuable indeed, but because it is quite impossible to get two people to agree upon the reservations which you present for their consideration. What was the discussion as it appeared to us, the minority of the Royal Commission? Let us be perfectly clear in our minds as to the proposal of the Chancellor of the Exchequer. He himself has indicated this afternoon that he agrees with the minority that you cannot properly and equitably apply Income Tax at least to the surplus of co-operative societies. He has given that indication of his opinion, and I and others are very grateful for it, but in this reservation there was no suggestion at all of applying Income Tax as such to any portion of the results of the trading of the co-operative movement. That was discarded. It was held that the results of that trading were to flow from what we call the principle of mutuality—I do not like the phrase in many ways, but it is one which is generally adopted—and that in no case could that surplus be regarded as a profit in the ordinary sense of the term. Then let us rule out Income Tax.
As regards the co-operative societies, there is a surplus arising from their method of trading from year to year, and they divide that surplus into two sections, and it is really on the division of the surplus that probably the whole of this controversy this afternoon has arisen. A very large part of the surplus—I think I am correct in saying by far the greater part of the surplus—is returned to the members as a dividend on purchases at the end of the quarter, or whatever other accounting period the societies may adopt. Let me say, in passing, that there is a great deal to be borne in mind regarding that dividend, the discussion of which is really irrelevant at the moment, and I will not pursue it beyond stating that in Scotland —and I am told also in many parts of England—it really amounts to nothing more than the saving of the quarterly or half-yearly rent. I know that in many parts of Scotland, at all events, the divi-
dend is lifted from the co-operative societies and transferred bodily to the house factors and house proprietors as payment of the half yearly or quarterly rent—I think, for the most part, a half-yearly transaction— and let me add that the house factors and house proprietors are among the warmest supporters of that method of co-operative trading. They have never concealed their admiration for the co-operative movement. They have said that, great as is the power of thrift in Scotland, they believe it is safeguarded by the co-operative practice, and that they get their rents in a way that otherwise they would not get them.
That is irrelevant and by the way, but we come to the other section of this surplus arising from the mutual trading, and that section is held by the societies for the time being for various purposes. The Chancellor of the Exchequer does not propose to apply Income Tax at the moment to that undistributed portion of the surplus, but he has selected, under perhaps the general tenor of feeling, as he regards it, in the Report of the Royal Commission, the undistributed portion of the surplus arising from the mutual trading, and he has said: "While at the moment to that I shall not apply Income Tax, I intend to apply the Corporation Profits Tax to it, and I do so for the reasons which I have just given to the House." I venture to say with very great respect that I am utterly unable to follow the logic of this proposition. Most hon. Members will agree—I do not think for a single moment it can be seriously disputed—that the two sides of that surplus, distributed as a dividend on purchases, undistributed and held over for certain temporary and other ends, are the result of one course of mutual trading and form one fund, and that if we are going to apply any tax to it at all, it is really an irrelevant consideration to take into account the destination of any portion of that fund. I cannot understand why a portion which is merely held temporarily, as to a large ext nt it is held temporarily, is selected for differential treatment as far as the application of the Corporation Profits Tax is concerned. Let me make it perfectly plain again in passing that I entirely agree with the Chancellor of the Exchequer when he indicated in his speech that far too great importance had been attached to this problem as a whole I agree with the authorities of the Inland
Revenue and with other people who have said that from the point of view of revenue there is very little in those propositions. I am speaking entirely for myself, but I do not think it is wise to push that side of the argument; it is far better policy and it is far greater wisdom, it seems to me, to concentrate on the principle and to ask ourselves why we should seek to divide artificially a fund which is one fund, resulting from one course of trading, apply the Corporation Profits Tax to the undistributed portion of that surplus, and allow all the rest to go free because it is handed over as a dividend on purchases to the Members. That is the great objection, and it seems to me the lasting objection, to the proposal which the Chancellor of the Exchequer has adopted.
It has been repeatedly said, not only by the right hon. Gentleman, but by many hon. Members of this House, "Did you not say as the minority in the Royal Commission that if ever a Corporation Profits Tax were applied in Great Britain you would regard co-operative societies as a legitimate target for that imposition?" It is perfectly true that if you read five or seven lines of the reservation that would be the conclusion at which any ordinary mind would arrive, but we of the minority have repeatedly asked our friends and opponents to read the rest of the reservation, which goes on to point out that this surplus which arises from the trading of the co-operative societies is not a taxable profit in the ordinary or in the accepted sense of that term, and that you can never apply to that surplus any tax which is admittedly a tax on profits. That is the whole of the rest of our argument in that reservation, but while we can get people to read the first few lines of the reservation, we seem to be utterly unable to get anyone to read the rest of it, which is, a defence of the principle of mutuality and which goes entirely, in my view, to prove the strength and wisdom of the case which we submitted in our minority recommendations to the public. Hon. Members, both behind me and on the other side of the Committee, have indicated that we who signed that reservation have something for which to apologise, something to withdraw, something to regret. I, as one of the parties who signed it, have nothing to withdraw,
nothing to alter at all, except perhaps to make the phraseology a little clearer than it is. The paragraph, to my mind, requires to be read as a whole, and a statement on the question of mutuality. On the question of the surpluses arising from the trading of the co-operative societies, look at the position to which we are committed if we accept the arguments of the Chancellor of the Exchequer. He has said that he intends to apply the Corporation Profits Tax to the undistributed portion of the surplus. The Royal Commission unanimously—there was no division of opinion at all on this point—said that that surplus is not a profit in the ordinary sense of the term. Now the Corporation Tax is, beyond all question, a tax upon profits. That is the beginning and end of our case. The Corporation Tax, being a tax upon profits, is to apply to something which the Royal Corn-mission said was not profits, and if 1 argued it, for a week I could not make it clearer than I have made it now.
May I respectfully draw the attention of hon. Members to what I regard as the social effect of this imposition? It may be said that, if it is only a small sum of money involved, it is negligible, but we attach the very greatest importance to the introduction of the principle at all. We have been reminded time and again in the Debate that co-operators, as such, enjoy no special privilege or exemption in the matter of Income Tax. They pay like other individuals. They have to pay on the non-mutual trading. They have to pay on five out of six heads of their enterprise. But this head is a question of surplus. They enjoy no special exemption. I always avoid that word in these discussions, because it is not exemption they enjoy at all. They have no privilege apart from other members of the community. They are entitled, if anything, to have regard paid to the thrift, to the enterprise which they have shown, and to the undoubted part which that movement has played in stabilising social and economic conditions in this country; but I do not press that argument upon the attention of the Committee. I invite hon. Members to look at what is done with the undistributed portion of the surplus. I know that the practice of co-operative societies varies. In many parts of the country one method is adopted: in other parts, other methods.
But I am going to quote from the experience of one of the largest societies in Scotland, and tell hon. Members that the undistributed portion is used for four or five purposes, of which these are the chief. They have a contingency fund which, I admit, is different from the others. The other purposes are benevolent, including charity, which may be local or national. They provide for unemployment among their members. They devote a portion of the money to educational and other schemes, and, in short, they engage in various forms of public and social enterprise, which I have no hesitation in saying, would have to be undertaken by the State, at least to some extent, if it were not covered by the co-operative societies.
Now it is really upon that form of enterprise that you are going to lay your hands by the imposition of this tax. We cannot consider any Finance Bill we cannot consider any scheme of taxation in Great Britain without having very clearly in our minds what the effect will be. How will it affect thrift? How will it affect stability which we all desire in the social and economic structure? Are you going to do anything to penalise a section of people who have built up a great and legitimate organisation? I admit that the sum involved to-day is small, but the principle involved is of the very highest importance. I urge strongly that we hesitate before we embark upon this scheme. We should realise that we have here a cause which we are touching in very small part, but which, notwithstanding, is regarded as very important; which has done so much to safeguard the economic and social conditions of a large section of the 44,000,000 of our population; which claims no special right or exemptior today, but merely asks to be allowed to carry on its business, to pay its legit mate share of taxation, but not to be exposed to a penalty upon its enterprise and energy, which, it thinks with perfect justice, with no wrong to other sections of the community, could be avoided by the Finance Bill now under debate.

6.0 P.M.

Mr. PRETYMAN: I think the Committee will agree that this particular question is one of the most thorny and difficult which could possibly be brought before us, and, if anybody can realise that to the full, it is those of us who heard the evidence for and against the
application of Income Tax to the co-operative societies before the Royal Commission on Income Tax, the report and reservations on which have been a good deal referred to in this Debate. I listened with very great interest to the speeches which have been made on behalf of the co-operative societies, and, if I may venture to say so, able as those speeches were, they seemed to me to take rather too narrow a ground for a very wide question. The speeches so far have been mainly based on the question of the definition of profits, and whether a particular form of profit is or is not liable under existing law, or ought to be made liable under future law, to taxation either in Income Tax or in this Corporation Tax. I think we must take a wider view than that. In the first instance, I cannot agree with the remark made by my hon. Friend who spoke last, when he said he did not think that because of the growth of the co-operative society movement, and the very great extension of their trading operations—admitting entirely that these trading operations are mutual, still they are trading operations, and they cover an enormous area—any change in principle in the matter of taxation arose on that account. I differ from him there. I do think that when an organisation, however beneficent—and I do believe that the co-operative movement has been productive of enormous good—has not only grown enormously as a trading community, but has ambitions to monopolise trade—I do not think anybody regards those ambitions as illegitimate, and nobody desires to find fault with them for having them—but surely when they arrive at such a point as that, they must take some responsibility for bearing their share of the burdens which have to be borne by the whole community to maintain, to protect and to secure the structure of trade as a whole.
I, at any rate, listened most carefully to the speeches, but it was only in the last speech that I found an echo of the thoughts in my mind, although I think the hon. Member said it a little perfunctorily in the last phrase or two of his peroration, that the co-operative societies were perfectly willing to bear their fair share of taxation as a whole. If they start with that I am prepared to go a long way with them, but I have not seen much evidence of that in the speeches which
have been made, and I do feel the ground would be very much cleared if that point could be settled. I heard with great interest the speech of the Chancellor of the Exchequer on that point, that it may be that this particular part of the surplus which it is proposed to tax may not be the most suitable subject to which this or any other tax should be applied. I quite agree with him. I do not think it is a suitable subject, for reasons which I will mention directly. He invited cooperative societies to confer with him as to finding some other and better way, and I, for one, made that very suggestion in a reservation which I and my hon. Friend behind me signed, and which is in the Report of the Royal Commission. Trading profit is so distinct under the Income Tax law, and this tax is so near Income Tax, that I cannot really see the practical difference. The Chancellor of the Exchequer was very strong in his argument that this was a totally different kind of tax from an Income Tax. I cannot agree with that. It may appear to be so. It is levied on a corporation instead of an individual, but who pays it? The individual shareholders pay it, and nobody else, and it is an Income Tax, and nothing else but an Income Tax. I hope when we come to the question of the tax itself we shall have something to say on what was brought before the Income Tax Commission.
I only mention that, because I do think that those who have been arguing in favour of co-operative societies have very strong ground when they say that the particular profit it is proposed to tax here is so near the same kind of profit on which they are not taxed that they really cannot distinguish any difference between them. Then again, as mentioned in our reservation, I agree entirely with what my hon. Friend opposite said, that when you are taxing a profit as a profit surely the question of whether it is a profit or not does not depend upon its definition but upon its origin. I was rather interested in listening to the hon. Member for Linlithgow (Mr. Kidd), who made such an able speech at the opening of this Debate. The whole burden of his speech was that this was only spending, and therefore could not be taxed. The hon. Member who supported him, and spoke after him, used the argument
throughout his speech that this was nothing but saving, and therefore could not be taxed. I cannot see that saving and spending are identical, and, therefore, I think the argument of my hon. Friend the Member for Linlithgow was a good deal stronger than the argument about saving. But this is a profit, and also this seems to me to be such a weak point in this tax, or any tax, on the part of the surplus, that it is entirely within the discretion of the societies how much they allocate to bonuses and dividends, and how much to their reserve or any form of spending, and, therefore, if they choose to avoid this tax they can do so. But in avoiding the tax they may do a very serious injury to the work of their societies, because it is clearly desirable, in carrying on any trading association or society, that there should be proper reserves and that those reserves should be available to build up trade. When you put on a tax which discourages the creation of reserve and the accumulation of money for trading purposes, I think you are doing an unnecessary injury to a society, and out of proportion to any revenue which you are likely to have. This matter was argued at great length before the Royal Commission, and the conclusion to which I came quite definitely was that co-operative societies ought to pay their fair share of the general taxation of the country—quite clearly I came to that conclusion—in proportion to their ability to pay. That is as far as the hon. Member who purported to place a plan before the House went in his suggestion. The broad view was taken that Income Tax is not a suitable instrument for taxing mutual co-operative profits. Therefore, this Corporation Profits Tax, in my opinion, is not suitable. Therefore I do suggest again, with my reservation, that the proper method of dealing with the subject is that this Clause should be passed as the Chancellor of the Exchequer suggested, and between now and the Report stage that the right hon. Gentleman should confer with the representatives of co-operative societies on this matter, and, assuming that what my hon. Friend opposite said is a fact—and I am sure nobody contradicts it—that the co-operative societies are willing to pay their fair share, then they know their own business better than anyone else, and the conference should be fruitful. I
agree with what was said yesterday. It is not for the taxpayer as a rule to suggest an alternative to the proposals of the Chancellor of the Exchequer. That is the business of the Chancellor. But in this case I do think that the business of the co-operative societies, being so peculiar in its character, and being managed so ably and on such particular lines, that it is rather more up to them than it would be to any ordinary part of the community, and they are so well organised that they can speak with one voice—up to them, I say, to try to suggest to the Chancellor some method by which either this tax or some analogous tax could be levied so that they may not be faced with the feeling which is throughout the country, that they are taking up a very large share of trade, and that they are not paying their fair share of taxation upon it.
Take what happened the other day. There was a large cake mill in the Midlands which was in private hands, and so paying a large share—that is an ordinary share—according to its profits, of Income Tax. That cake mill was purchased by the Wholesale Co-operative Society. It does the same work, the same business, receives just the same protection and privileges from the State, but it has ceased to contribute because it has been acquired by the co-operative societies.

Mr. A. M. SAMUEL: That is the point!

Mr. PRETYMAN: That surely cannot be right? The whole of this trouble really arises from the feeling, which must be recognised, it seems to me, by those who run the co-operative societies—and I hope they will recognise it—and the feeling is even amongst those who are well-wishers of friendly and co-operative societies—that they are not really paying their fair share of the national burden in proportion to the increase in their wealth and their operations. I do not believe the community for a moment wishes to dictate what tax they should pay. This particular tax may be unsuitable. I do not think the House of Commons—I certainly do not wish to force this or any other tax upon them against their will provided they will not say to us: "No, we simply will not pay this tax, but some time later we will pay some other tax." I always have a sort of feeling at the back of my mind that whenever tax is proposed after they will have an equal objection to it. I do
earnestly beg of them to try and consider this matter from a wider standpoint. If this particular tax will not suit them let them between now and Report try to put forward something which will satisfy the community that they are fair dealing men and desire to pay their fair share. If they will do that I am quite sure the Chancellor of the Exchequer and hon. Members from all parts of the Committee will endeavour to meet their wishes in regard to this particular tax in consideration of their fair attitude on the general subject of taxation.

Mr. HAILWOOD: I rise to support the Chancellor of the Exchequer in the financial proposal of the Corporation Profits Tax. I have listened with a great deal of interest to the Mover and Seconder of the Amendment which seeks to eliminate the co-operative societies from the operations of this tax. It has been forced upon me by hon. Members who have recently spoken that they may know a good deal about the co-operative societies, but I think they know very little about the Amendments which stand in their name on the Paper. They have taken us over the whole field of Income Tax and applied it to ordinary trading from which co-operative societies are exempt, and have said very little really about the actual Corporation Profits Tax which the Chancellor of the Exchequer proposes. We have heard a good many phrases about the immutability of trading profits—that when made by co-operative societies they are not profit, but surplus. One thinks that it is about time that there was published a key to this phrasing in order to show how they differ from the person who dares to speak in his ordinary language about ordinary things.
It was said by the hon. Member for Linlithgow that the Members of co-operative societies were poor people, and that it was a great shame to tax the poor people. In a sentence or two later he said that it was a tax on thrift, and it was very wicked to tax thrifty people. I have yet to learn that thrifty people, and poor people are synonymous terms. One would have thought they were either poor or thrifty, but not the two together. To my mind co-operative society members are not poor people. They do not form the poorest part of the community. They may have started the co-operative movement from the thrift point of view, but to talk of them as poor people is
quite erroneous. This tax is not a question of taxing income—which is another thing altogether. It is a tax that would fall on all traders whether they are or not limited liability companies, and who may be supplying goods to the poorest people in the community. The co-operative societies may be supplying goods to classes of people of the thrifty working-class people. The Mover and Seconder of this Amendment suggested that other people are better able than they to meet this tax. That seems to me to be totally unjust. The right hon. Gentleman (Mr. Pretyman) gave an instance to the House, and a very good one, a concrete example, of the operations of this tax and the injustice which accrues to the State by exempting any business that is under the control of co-operative societies. I could confirm the cake mill example from the city which I have the honour to represent—Manchester.
We have there a modern flour mill which was built, a matter of 12 or 14 years ago, with modern machinery. It was built by a firm of millers from Liverpool. It ran successfully for a few years; then it was sold to the Wholesale Cooperative Society. It has been run since by that society. I take it that the mill is turning out pretty much the same quantity of stuff as before, that it is receiving wheat from all parts of the globe, and that that wheat, coming across the ocean, requires the protection of the British Navy in order that it may safely arrive here. I fail, therefore, to comprehend why in the first few years of this mill's existence it should be subjected to a tax in order that. its raw material might have the protection of the British Navy, and why during the last few years, because it belonged to a co-operative society, it is exempt from this taxation. Under the Corporation Profits Tax, which the Chancellor proposes, there would, at any rate, be some attempt to deal fairly between the two classes of trading. It is quite a misnomer, and quite wrong, for the Mover and Seconder of the Amendment to argue as though this were intended to be a blow at co-operation. It is not so intended in any way, or to be a punitive tax, or to be a tax to restrict the progress of co-operation. It is simply a tax on all trading organisations, whether they be co-operative societies or limited liability
companies. The Chancellor does not make any distinction in any shape or form, and I think that in the future there is a chance of this tax being accounted a much fairer form of tax than the Income Tax is at the present day. I hope to see it increased, and the Income Tax reduced.

Sir D. MACLEAN: The subject, as many hon. Members have already stated, is one of very considerable difficulty. Variants of examples have been given by two or three recent speakers, and the last speaker said: "Look on the one hand and see private concerns paying Income Tax, and on the other hand the co-operative societies paying none." That is really the whole question—as to whether the one is trading with the general public, and the other is engaged in mutual trading under which, if they so desire, there may be no surplus at all. Illustrations of that kind are very attractive, but really do not get to the root of the matter which are we attempting to handle this afternoon. I followed with very great interest the speech of the Chancellor of the Exchequer. We all agree it was a very fair and frank statement of the case, and one such as we would expect from him. He made this perfectly clear—he had no desire to tax the surplus of the societies which hitherto had escaped or were exempt from Income Tax. "This," said he, "is an entirely new proposal by which I levy 5 per cent. on the entity and not on the individual." I think that is the way in which he expressed it.
See to what it leads us? How does the right hon. Gentleman find out the basis of this tax? He ascertains it only in one way, that is he gets at what the Bill calls the profits. The Bill does not talk about the surplus, but quite frankly talks about profits. Once that gets on the Statute Book as the basis on which you are going to levy a tax on co-operative societies, all wise men know what will follow. You are going to levy a tax on quite a different thing to what co-operative societies have been taxed in the past. An interesting fact was disclosed by the Chancellor of the Exchequer when he was asked whether the reserves in which these surpluses were to be invested included stock in trade and he said, "Yes, of course." I ask anybody who knows anything about co-operative societies what the effect of that must be. It is not as if the surplus had been invested in Government securities when the income
bears the tax, but you are going to bring into the assessment the stock-in-trade.
See what is going to happen in co-operative societies. When they take stock they are going to take it with the knowledge that they are taking part of their stock-in-trade for the levy of a tax upon it. This has never happened before. One part of the surplus you are going to exempt, in fact you shrink with considerable indignation from the idea of it, and another part you are going to tax. In this matter of taxing, who are you going to deal with? What body of subjects are you going to irritate by your tax? You are going to set up an immense confusion and irritation and suspicion amongst 4,000,000 people in this country.
My next point is having gone to all this trouble, how much are you going to get of it? The Chancellor of the Exchequer does not expect to get more than £180,000 a year out of it, and no doubt these societies will adopt various legal methods and ways of avoiding the tax, and my opinion is that it is not likely to yield more than £100,000. Those are two practical points to which every Chancellor of the Exchequer always addresses himself when he levies a tax. He asks, in the first place, "What bother am I going to raise about it?" and in the second place, " When I have raised the bother, how much, am I going to get?" On both those grounds, in the financial result, this proposal is not worth imposing, and it will be a very disturbing factor amongst a large and important section of the subjects of this country. I have dealt with the proposal of the Government as I see it in this Bill, and as I know it from my own observations. I suggest to the Government that it is not worth while, because you will set up an agitation which you will not quell by the explanation of the Chancellor of the Exchequer. Every society will be reading this Clause when it passes into law, and they will say that the whole of this claim is a proposal to tax our profits.
The Clause uses the word "profits." Suppose I go down to my constituents or on to any other platform, and I say, "The Chancellor of the Exchequer says he does not propose to tax your profits," and then I start reading the Clause. Under those circumstances, I defy any hon. Member of this Committee, when addressing his constituents, to carry any
single one of his audience with him in the explanation he will have to give as to the arguments used by the right hon. Gentleman in regard to this Clause, notwithstanding the fact that the Clause states that there is no taxation of co-operative surpluses. I come back to the point which I am urging upon the Chancellor, which is that it has not been made clear to my mind in regard to the differentiation which he set up, and if it can be made clear it is so fine a technical point that you will not get co-operators to understand it, and you will be setting up in the minds of a very large and important body of citizens, who are good citizens and who pay their taxes, a doubt and suspicion in regard to what they consider is the sheet anchor of their existence. You will be creating suspicion and distrust among them, and what do you expect to get at the end of it? After all the deductions and allowances, it will amount to a beggarly £100,000 for all this trouble. I suggest that if the right hon. Gentleman is going to levy a Corporation Tax, he had better devise some other way of dealing with it, because this is not the right way. Let him take it to avizandum, as they say in Scotland. The right hon. Gentleman said he was not bound by the method, and he stated that if you can suggest any other way whereby he could levy a Corporation Tax, he would like to be shown the method At any rate, I am sure this is the wrong way, and as far as my opinion is worth anything, I think this proposal might very well be withdrawn, and if it is not, I shall be compelled to vote for the Amendment.

Mr. CHAMBERLAIN: I do not rise for the purpose of continuing the arguments which I put before the Committee earlier in this Debate, but simply to make an appeal to the Committee. I think the case for and against has been very fairly and fully stated in the different speeches which have been made. The Committee is aware that, under some difficulty, the Government so arranged the discussion of the Budget business as to meet the convenience and wishes of different sections of the Committee. We have still a great number of very important questions, and in the general interests of business and in the interests of hon. Members who want to debate other subjects, I hope we shall now come to a
decision on what is a very important, but, at the bottom, a simple issue.

Mr. MYERS: I had a fairly good innings upon this matter during the Second Reading Debate, and a very definite conclusion has been arrived at for some time in my own mind as to what there is at the back of this proposal. I believe the House thoroughly understands what is proposed and what is intended when the tax is applied. In the first instance, it was a tax upon co-operative societies, and it afterwards became a question of a Corporation Tax being levied upon the whole of the surpluses of our co-operative societies, and now it has dwindled down to the Corporation Tax being applied to a very insignificant part of those particular surpluses. I have no doubt that as soon as this proposal finds its way on to the Statute Book, the agitation will continue until a further burden is put upon co-operative societies. This is the culminating point of a long and persistent agitation by those interests who feel that the co-operative movement is hostile to their development and progress. After all, what a contradiction this imposition upon the co-operative movement is upon all the pronouncements about thrift, self-reliance, and the other qualities that working-class movements should practice! The working-class population have been preached at by all sections of the community, and they have been told that they had their own salvation in their own hands and that they could work out their own destiny. They have been told that they had their economic emancipation in their own charge, and that if they only applied all those virtues, that could be very easily achieved.
The co-operative movement is the expression of the practice of many of those virtues which, in days gone by, it was urged the working-class movement of the country should exercise. There are many sections of people in the country who held that the working-class movement was incapable of working out its own emancipation to the extent it has been able to do through the co-operative movement. That movement has brought together the productive capacity of large sections of the population with consuming needs. It has harnessed its produc-
tive energy with its productive and distributive capacity, and in that way has solved for itself a great problem, which one element in the community, at any rate, at one time thought it would not be able to do. Much has been said in respect of the mutuality of our co-operative societies. I do not propose to refer to that point. I want to deal with a matter which the Chancellor of the Ex-chequer gave expression to this afternoon. The right hon. Gentleman admitted that the co-operative societies of the country pay Income Tax under Schedule B on property and investments, and in various other directions. Roughly speaking, 90 per cent. of the members of the co-operative movement do not pay Income Tax at all as individuals. So obviously, if any Income Tax be put on the co-operative societies of the country, 90 per cent. of the members who are not entitled to pay at all are called upon to bear the burden. Instead of being subjected to a further imposition, the co-operative movement has a claim for the return of the Income Tax which these 90 per cent. pay indirectly. Again, the remaining 10 per cent. who do pay Income Tax as individuals, also pay it as co-operators. One section of the co-operative membership pay twice, while another section, which should not pay at all under the law, is called upon to pay once.
There is a difference between the cooperative societies and the trading organisations of the country which, I think, the Chancellor of the Exchequer has failed to realise. He ought to make a distinction between them, which he does not do. By no stretch of imagination can the co-operative movement be brought within the same category as the many trusts, syndicates and companies which exist. The trust, syndicate or company, with its thousand or more shareholders, goes into trade and trades with the community for the purpose of raising a certain amount of profit, which is to be dispersed and distributed among its shareholders—a small handful drawn from the community. The co-operative surplus, with its profit made in a well-defined circumscribed area, is drawn from the members of the co-operative society themselves. It is not drawn from any outside source, and every penny of the profit so realised finds its way eventually back in the channel from which it
was drawn, whereas the profit of the trust, or syndicate, or company, is drawn from the community, and finds its way into the pockets of a very limited number of individuals. This proposal also breaks down when it makes the declaration that one section of the cooperative surplus should come under this imposition, and the other section should be permitted to go free.
I have said that this tax is the culminating point of a long and persistent agitation on behalf of certain trading interests in the country. I do not think that the objection to it comes from the small traders in the community, because they have benefited by the unsound policy of our co-operative movement. When the co-operative movement is out for dividends, it rushes up prices to an artificial standard, and it is generally these high prices which enable the small trader who lives in close proximity to a co-operative store to make better prices and profits for himself. To the extent to which our co-operative movement is beginning to discover what an unsound and uneconomic policy is pursued on these lines, it is bringing, and will continue to bring, the hostility of the small trader. I think the main hostility to our co-operative movement in these days comes from another element of society altogether. The co-operative movement was all right while it was going in for dividends and for distributing profits. It then bought its flour and its coal from the trusts and syndicates, and thereby helped to make their profits. It did that so long as it specialised chiefly in the distributing trade, and made its profits, and the field of private enterprise was quite willing to leave the co-operative movement alone, and look upon it as a good customer which paid the taxes of the community out of the profits it levied. But the co-operative movement has been learning the lesson of experience, and instead of purchasing from trusts and syndicates, it is beginning to produce for itself. There it cuts across the private trader on the one side and interferes with the trusts and syndicates on the other. If any evidence be required in support of that position, I will read two lines only from a Report of the Royal Commission—
By the great and rapid growth of the co-operative movement in recent years, a number of individual trading competitors are adversely affected by its progress.
There is the real hostility to our co-operative movement. I am not complaining about the attitude of the Chancellor of the Exchequer, nor am I complaining about this particular tax upon the co-operative societies. I believe it is a step in our ordinary economic development. If this tax did not fall on co-operative societies something else which would hamper their progress would be put in its place. I conscientiously believe that the economic development of trusts and syndicates in this country has reached such a stage that it has to challenge anything which comes up against it. While the small private trader grumbles at the co-operative movement, the multiple shop owner and the trust and the syndicate come to Parliament and ask that steps shall be taken to hamper the development and retard the progress of our co-operative movement. That, I believe, to be behind this proposal. I hold the opinion that if this proposal had not come something of a similar character would have been put in its place. Sixty-six thousand joint stock companies with a paid-up capital of £2,700,000,000 existed in this country before the War. These are the people who are up against the co-operative movement. I would ask any hon. Member what is the next stage of the economic development of the trusts and syndicates which have hold of the community by the throat on the one side and hold the Government on the other. They have exploited the necessities of the people. They have exploited the requirements of the State. Even the discussion which we had yesterday in regard to the Excess Profits Duty is evidence that the trusts and syndicates in this country were not prepared to accept ordinary profits. If they had not made excessive profits the tax would not have been necessary. On the other hand, the co-operative movement has protected the community. It has mad & considerably less profit on its turnover during the War and since than it did in pre-War days. The average dividend in pre-War days was 3s. in the pound. At the present time it is nearer 1s. 6d. in the pound. The co-operative movement of the country has nearly 4,000,000 members. They represent nearly one-third of the entire population who pay a duty of a shilling in the pound on tea, a 2¾d. duty on sugar, and taxes on tobacco, and so on.

The CHAIRMAN: These remarks are rather too general, and I would suggest to the hon. Member that he should keep more to the particular Amendment which is under consideration.

Mr. MYERS: The co-operative movement in this country will demand as soon as this tax is imposed upon it, as undoubtedly it will be—and it will be one of the best lessons it could get—it will demand that those avenues of taxation

which are not working-class savings but are the accumulated wealth of the country shall be the field for taxation in the future.

Mr. CHAMBERLAIN: rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 289: Noes, 73.

Division No. 204.]
AYES.
[6.45 p.m.


Adair, Rear-Admiral Thomas B. S.
Davies, Thomas (Cirencester)
Jackson, Lieut.-Colonel Hon. F. S.


Ainsworth, Captain Charles
Davies, Sir William H. (Bristol, S.)
James, Lieut.-Colonel Hon. Cuthbert


Armitage, Robert
Davison, Sir W. H. (Kensington, S.)
Jephcott, A. R.


Ashley, Colonel Wilfrid W.
Dewhurst, Lieut.-Commander Harry
Jesson, C.


Astor, Viscountess
Donald, Thompson
Jodrell, Neville Paul


Atkey, A. R.
Duncannon, Viscount
Johnson, Sir Stanley


Baldwin, Rt. Hon. Stanley
Edwards, Major J. (Aberavon)
Johnstone, Joseph


Balfour, George (Hampstead)
Elliot, Capt. Walter E. (Lanark)
Jones, G. W. H. (Stoke Newington)


Balfour, Sir R. (Glasgow, Partick)
Elveden, Viscount
Jones, Henry Haydn (Merioneth)


Banbury, Rt. Hon. Sir Frederick G.
Eyres-Monsell, Commander B. M.
Jones, William Kennedy (Hornsey)


Banner, Sir John S. Harmood-
Falle, Major Sir Bertram G.
Kellaway, Rt. Hon. Fredk. George


Barker, Major Robert H.
Fell, Sir Arthur
Kidd, James


Barnes, Rt. Hon. G. (Glas., Gorbals)
Fildes, Henry
Kiley, James D.


Barrand, A. R.
Fisher, Rt. Hon. Herbert A. L.
King, Commander Henry Douglas


Barrie, Rt. Hon. H. T. (Lon'derry, N.)
FitzRoy, Captain Hon. E. A.
Kinloch-Cooke, Sir Clement


Barton, Sir William (Oldham)
Ford, Patrick Johnston
Knight, Major E. A. (Kidderminster)


Beckett, Hon. Gervase
Foreman, Henry
Knights, Capt. H. N. (C'berwell, N.)


Bell, Lieut.-Col. W. C. H. (Devizes)
Forrest, Walter
Lane-Fox, G. R.


Bellairs, Commander Carlyon W.
Foxcroft, Captain Charles Talbot
Law, Rt. Hon. A. B. (Glasgow, C.)


Benn, Sir A. S. (Plymouth, Drake)
Gange, E. Stanley
Lewis, Rt. Hon. J. H. (Univ., Wales)


Benn, Capt. Sir I. H., Bart.(Gr'nw'h)
Ganzoni, Captain Francis John C.
Lewis, T. A. (Glam., Pontypridd)


Bentinck, Lord Henry Cavendish
Gardner, Ernest
Lister, Sir R. Ashton


Bigland, Alfred
Gibbs, Colonel George Abraham
Lloyd, George Butler


Bird, Sir Alfred
Gilbert, James Daniel
Lloyd-Greame, Major Sir P.


Blair, Reginald
Gilmour, Lieut.-Colonel John
Locker-Lampson, Com. O.(H'tingd'n)


Blake, Sir Francis Douglas
Glyn, Major Ralph
Lorden, John William


Borwick, Major G. O.
Gould, James C.
Lort-Williams, J.


Boscawen, Rt. Hon. Sir A. Griffith-
Goulding, Rt. Hon. Sir Edward A.
Loseby, Captain C. E.


Brassey, Major H. L. C.
Greenwood, William (Stockport)
Lowe, Sir Francis William


Bridgeman, William Clive
Greer, Harry
Lyle, C. E. Leonard


Briggs, Harold
Gregory, Holman
M'Curdy, Charles Albert


Brittain, Sir Harry
Greig, Colonel James William
M'Donald, Dr. Bouverie F. P.


Broad, Thomas Tucker
Guinness, Lieut.-Col. Hon. W. E.
Macdonald, Rt. Hon. John Murray


Brown, Captain D. C.
Gwynne, Rupert S.
M'Guffin, Samuel


Bruton, Sir James
Hacking, Captain Douglas H.
Mackinder, Sir H. J. (Camlachie)


Buchanan, Lieut.-Colonel A. L. H.
Hailwood, Augustine
McLaren, Hon. H. D. (Leicester)


Bull, Rt. Hon. Sir William James
Hall, Lieut.-Col. Sir F. (Dulwich)
McLaren, Robert (Lanark, Northern)


Burn, Col. C. R. (Devon, Torquay)
Hambro, Captain Angus Valdemar
Macleod, J. Mackintosh


Butcher, Sir John George
Hanson, Sir Charles Augustin
Macnamara, Rt. Hon. Dr. T. J.


Campbell, J. D. C.
Harmsworth, C. B. (Bedford, Luton)
McNeill, Ronald (Kent, Canterbury)


Carew, Charles Robert S.
Harris, Sir Henry Percy
Macpherson, Rt. Hon. James I.


Carr, W. Theodore
Haslam, Lewis
Marriott, John Arthur Ransome


Carter, R. A. D. (Man., Withington)
Henderson, Major V. L. (Tradeston)
Martin, Captain A. E.


Casey, T. W.
Hennessy, Major J. R. G.
Matthews, David


Cautley, Henry S.
Henry, Denis S. (Londonderry, S.)
Mitchell, William Lane


Cayzer, Major Herbert Robin
Herbert, Hon. A. (Somerset, Yeovil)
Molson, Major John Elsdale


Cecil, Rt. Hon. Evelyn (Birm., Aston)
Herbert, Dennis (Hertford, Watford)
Montagu, Rt. Hon. E. S.


Cecil, Rt. Hon. Lord R. (Hitchin)
Hewart, Rt. Hon. Sir Gordon
Moore, Major-General Sir Newton J.


Chamberlain, Rt. Hn. J. A.(Birm.,W.)
Hickman, Brig.-Gen. Thomas E.
Moreing, Captain Algernon H.


Chamberlain, N. (Birm., Ladywood)
Hills, Major John Waller
Morison, Rt. Hon. Thomas Brash


Clough, Robert
Hinds, John
Morrison, Hugh


Coats, Sir Stuart
Hoare, Lieut.-Colonel Sir S. J. G.
Mosley, Oswald


Cobb, Sir Cyril
Hohler, Gerald Fitzroy
Mount, William Arthur


Cohen, Major J. Brunel
Holbrook, Sir Arthur Richard
Murray, Lieut.-Colonel A. (Aberdeen)


Colfox, Major Wm. Phillips
Hood, Joseph
Murray, John (Leeds, West)


Colvin, Brig.-General Richard Beale
Hope, Sir H.(Stirling & Cl'ckm'nn'n,W.)
Murray, Major William (Dumfries)


Conway, Sir W. Martin
Hope, James F. (Sheffield, Central)
Nall, Major Joseph


Coote, Colin Reith (Isle of Ely)
Hope, Lt.-Col. Sir J. A. (Midlothian)
Neal, Arthur


Cope, Major W. (Llandaff and Barry)
Hopkins, John W. W.
Newman, Colonel J. R. P. (Finchley)


Cory, Sir C. J. (Cornwall, St. Ives)
Hopkinson, A. (Lancaster, Mossley)
Newman, Sir R. H. S. D. L. (Exeter)


Curzon, Commander Viscount
Hotchkin, Captain Stafford Vere
Newton, Major Harry Kottingham


Dalziel, Sir D. (Lambeth, Brixton)
Hume-Williams, Sir W. Ellis
Nicholson, William G. (Petersfield)


Davidson, Major-General Sir J. H.
Hunter, General Sir A. (Lancaster)
Norman, Major Rt. Hon. Sir Henry


Davies, Alfred Thomas (Lincoln)
Hurd, Percy A.
Norris, Colonel Sir Henry G.


Davies, Sir Joseph (Chester, Crewe)
Illingworth, Rt. Hon. A. H.
Oman, Sir Charles William C.


Ormsby-Gore, Captain Hon. W.
Roundell, Colonel R. F.
Tryon, Major George Clement


Palmer, Major Godfrey Mark
Royds, Lieut.-Colonel Edmond
Waddington, R.


Palmer, Brigadier-General G. L.
Rutherford, Colonel Sir J. (Darwen)
Walton, J. (York, W. R., Don Valley)


Pearce, Sir William
Rutherford, Sir W. W. (Edge Hill)
Ward, Col. J. (Stoke-upon-Trent)


Pease, Rt. Hon. Herbert Pike
Samuel, A. M. (Surrey, Farnham)
Ward, Col. L. (Kingston-upon-Hull)


Peel, Col. Hn. S. (Uxbridge, Mddx.)
Sanders, Colonel Sir Robert A.
Waring, Major Walter


Pennefather, De Fonblanque
Scott, Leslie (Liverpool Exchange)
Weston, Colonel John W.


Perkins, Walter Frank
Seddon, J. A.
Wheler, Lieut.-Colonel C. H.


Philipps, Gen. Sir I. (Southampton)
Shaw, William T. (Forfar)
White, Lieut.-Col. G. D. (Southport)


Pollock, Sir Ernest M.
Smith, Harold (Warrington)
Whitla, Sir William


Preston, W. R.
Smithers, Sir Alfred W.
Williams, Lt.-Com. C. (Tavistock)


Prescott, Major W. H.
Sprot, Colonel Sir Alexander
Williams, Lt.-Col. Sir R. (Banbury)


Pretyman, Rt. Hon. Ernest G.
Stanier, Captain Sir Beville
Williamson, Rt. Hon. Sir Archibald


Pulley, Charles Thornton
Stanley, Major H. G. (Preston)
Willoughby, Lieut.-Col. Hon. Claud


Purchase, H. G.
Starkey, Captain John R.
Wills, Lieut.-Colonel Sir Gilbert


Rae, H. Norman
Steel, Major S. Strang
Wilson, Capt. A. S. (Holderness)


Ramsden, G. T.
Stephenson, Colonel H. K.
Wilson, Daniel M. (Down, West)


Raper, A. Baldwin
Stevens, Marshall
Winterton, Major Earl


Ratcliffe, Henry Butler
Stewart, Gershom
Wolmer, Viscount


Rawlinson, John Frederick Peel
Strauss, Edward Anthony
Wood, Hon. Edward F. L. (Ripon)


Rees, Capt. J. Tudor- (Barnstaple)
Sturrock, J. Leng
Wood, Sir J. (Stalybridge and Hyde)


Remer, J. R.
Surtees, Brigadier-General H. C.
Wood, Major S. Hill- (High Peak)


Remnant, Sir James
Sutherland, Sir William
Woolcock, William James U.


Renwick, George
Sykes, Sir Charles (Huddersfield)
Yate, Colonel Charles Edward


Richardson, Sir Albion (Camberwell)
Talbot, G. A. (Hemel Hempstead)
Yeo, Sir Alfred William


Richardson, Alexander (Gravesend)
Taylor, J.
Young, Lieut.-Com. E. H.(Norwich)


Roberts, Rt. Hon. G. H. (Norwich)
Terrell, George (Wilts, Chippenham)
Young, Sir Frederick W. (Swindon)


Roberts, Sir S. (Sheffield, Ecclesall)
Terrell, Captain R. (Oxford, Henley)
Younger, Sir George


Robinson, S. (Brecon and Radnor)
Thomas, Sir Robert J. (Wrexham)



Rodger, A. K.
Thomson, F. C. (Aberdeen, South)
TELLERS FOR THE AYES.—


Rogers, Sir Hallewell
Thomson, Sir W. Mitchell- (Maryhill)
Lord E. Talbot and Mr. Dudley


Rose, Frank H.
Thorpe, Captain John Henry
Ward.


Rothschild, Lionel de
Townley, Maximilian G.



NOES.


Acland, Rt. Hon. F. D.
Hayward, Major Evan
Sitch, Charles H.


Bagley, Captain E. Ashton
Hirst, G. H.
Spencer, George A.


Barnes, Major H. (Newcastle, E.)
Hodge, Rt. Hon. John
Spoor, B. G.


Bell, James (Lancaster, Ormskirk)
Hogge, James Myles
Stanton, Charles B.


Benn, Captain Wedgwood (Leith)
Holmes, J. Stanley
Sugden, W. H.


Bowerman, Rt. Hon. Charles W.
Irving, Dan
Thomas, Rt. Hon. James H. (Derby)


Bowyer, Captain G. E. W.
Lambert, Rt. Hon. George
Thomas, Brig.-Gen. Sir O. (Anglesey)


Bramsdon, Sir Thomas
Lawson, John J.
Thomson, T. (Middlesbrough, West)


Briant, Frank
Lunn, William
Thorne, G. R. (Wolverhampton, E.)


Bromfield, William
Maclean, Rt. Hon. Sir D. (Midlothian)
Tootill, Robert


Brown, James (Ayr and Bute)
MacVeagh, Jeremiah
Wallace, J.


Cape, Thomas
Mills, John Edmund
Walsh, Stephen (Lancaster, Ince)


Carter, W. (Nottingham, Mansfield)
Morgan, Major D. Watts
Wedgwood, Colonel J. C.


Edwards, C. (Monmouth, Bedwellty)
Murray, Dr. D. (Inverness & Ross)
White, Charles F. (Derby, Western)


Entwistle, Major C. F.
Myers, Thomas
Wignall, James


Galbraith, Samuel
O'Grady, Captain James
Wilkie, Alexander


Glanville, Harold James
Parry, Lieut.-Colonel Thomas Henry
Williams, Aneurin (Durham, Consett)


Graham, R. (Nelson and Colne)
Raffan, Peter Wilson
Wilson, Rt. Hon. J. W. (Stourbridge)


Graham, W. (Edinburgh, Central)
Rendall, Atheistan
Wilson, W. Tyson (Westhoughton)


Griffiths, T. (Monmouth, Pontypool)
Richardson, R. (Houghton-le-Spring)
Wintringham, T.


Grundy, T. W.
Robertson, John
Wood, Major M. M. (Aberdeen, C.)


Guest, J. (York, W. R., Hemsworth)
Royce, William Stapleton



Hall, F. (York, W. R., Normanton)
Scott, A. M. (Glasgow, Bridgeton)
TELLERS FOR THE NOES.—


Hallas, Eldred
Sexton, James
Mr. Waterson and Mr. Neil Maclean.


Hancock, John George
Shaw, Thomas (Preston)



Hayday, Arthur
Short, Alfred (Wednesbury)

Question put accordingly, "That the words

'(a)Where the profits are profits or surplus arising from the trading with its own members of a society registered under the

Industrial and Provident Societies Acts no tax shall be charged,' be there inserted."

The Committee divided: Ayes, 140; Noes, 218.

Division No. 205.]
AYES.
[6.55 p.m.


Acland, Rt. Hon. F. D.
Bell, James (Lancaster, Ormskirk)
Brown, Captain D. C.


Adair, Rear-Admiral Thomas B. S.
Benn, Sir A. S. (Plymouth, Drake)
Brown, James (Ayr and Bute)


Adkins, Sir W. Ryland D.
Benn, Captain Wedgwood (Leith)
Cape, Thomas


Asquith, Rt. Hon. Herbert Henry
Bentinck, Lord Henry Cavendish
Carter, W. (Nottingham, Mansfield)


Astor, Viscountess
Blake, Sir Francis Douglas
Casey, T. W.


Bagley, Captain E. Ashton
Bowerman, Rt. Hon. Charles W.
Clough, Robert


Barker, Major Robert H.
Bowyer, Captain G. E. W.
Coote, Colin Reith (Isle of Ely)


Barnes, Rt. Hon. G. (Glas., Gorbals)
Bramsdon, Sir Thomas
Davies, Sir Joseph (Chester, Crewe)


Barnes, Major H. (Newcastle, E.)
Briant, Frank
Denniss, Edmund R. B. (Oldham)


Barrand, A. R.
Broad, Thomas Tucker
Donald, Thompson


Beckett, Hon. Gervase
Bromfield, William
Edwards, C. (Monmouth, Bedwellty)


Edwards, Major J. (Aberavon)
Lunn, William
Sitch, Charles H.


Elliot, Capt. Walter E. (Lanark)
Macdonald, Rt. Hon. John Murray
Spencer, George A.


Entwistle, Major C. F.
M'Guffin, Samuel
Spoor, B. C.


Ford, Patrick Johnston
McLaren, Robert (Lanark, Northern)
Sprot, Colonel Sir Alexander


Galbraith, Samuel
Maclean, Neil (Glasgow, Govan)
Stanton, Charles B.


Glanville, Harold James
Maclean, Rt. Hon. Sir D. (Midlothian)
Stevens, Marshall


Glyn, Major Ralph
MacVeagh, Jeremiah
Sugden, W. H.


Graham, R. (Nelson and Colne)
Mallalieu, F. W.
Taylor, J.


Graham, W. (Edinburgh, Central)
Martin, Captain A. E.
Thomas, Rt. Hon. James H. (Derby)


Griffiths, T. (Monmouth, Pontypool)
Mills, John Edmund
Thomas, Brig.-Gen. Sir O. (Anglesey)


Grundy, T. W.
Morgan, Major D. Watts
Thomson, F. C. (Aberdeen, South)


Guest, J. (York, W. R., Hemsworth)
Mosley, Oswald
Thomson, T. (Middlesbrough, West)


Hall, F. (York, W. R., Normanton)
Murray, Lieut.-Colonel A. (Aberdeen)
Thorne, G. R. (Wolverhampton, E.)


Hallas, Eldred
Murray, Dr. D. (Inverness & Ross)
Tootill, Robert


Hambro, Captain Angus Valdemar
Myers, Thomas
Waddington, R.


Hancock, John George
Newbould, Alfred Ernest
Wallace, J.


Hayday, Arthur
Newman, Sir R. H. S. D. L. (Exeter)
Walsh, Stephen (Lancaster, Ince)


Hayward, Major Evan
O'Grady, Captain James
Walton, J. (York, W. R., Don Valley)


Henderson, Major V. L. (Tradeston)
Ormsby-Gore, Captain Hon. W.
Ward, Col. J. (Stoke-upon-Trent)


Herbert, Hon. A. (Somerset, Yeovil)
Palmer, Major Godfrey Mark
Waring, Major Walter


Hills, Major John Waller
Parry, Lieut.-Colonel Thomas Henry
Waterson, A. E.


Hirst, G. H.
Rae, H. Norman
Wedgwood, Colonel J. C.


Hodge, Rt. Hon. John
Raffan, Peter Wilson
Wheler, Lieut.-Colonel C. H.


Hogge, James Myles
Ramsden, G. T.
White, Charles F. (Derby, Western)


Hohler, Gerald Fitzroy
Rees, Capt. J. Tudor- (Barnstaple)
Wignall, James


Holmes, J. Stanley
Remer, J. R.
Wilkie, Alexander


Hopkinson, A. (Lancaster, Mossley)
Richardson, R. (Houghton-le-Spring)
Williams, Aneurin (Durham, Consett)


Hurd, Percy A.
Roberts, Rt. Hon. G. H. (Norwich)
Wilson, Rt. Hon. J. W. (Stourbridge)


Irving, Dan
Robertson, John
Wilson, W. Tyson (Westhoughton)


Jephcott, A. R.
Rodger, A. K.
Wood, Major M. M. (Aberdeen, C.)


Johnstone, Joseph
Rose, Frank H.
Wood, Major S. Hill- (High Peak)


Kinloch-Cooke, Sir Clement
Royce, William Stapleton
Younger, Sir George


Lambert, Rt. Hon. George
Scott, A. M. (Glasgow, Bridgeton)



Lawson, John J.
Sexton, James



Lewis, T. A. (Glam., Pontypridd)
Shaw, Thomas (Preston)
TELLERS FOR THE AYES.—


Lloyd, George Butler
Shaw, William T. (Forfar)
Mr. Kidd and Sir John Hope.


Loseby, Captain C. E.
Short, Alfred (Wednesbury)



NOES.


Ainsworth, Captain Charles
Davies, Thomas (Cirencester)
Hope, James F. (Sheffield, Central)


Archer-Shee, Lieut.-Colonel Martin
Davies, Sir William H. (Bristol, S.)
Hopkins, John W. W.


Armitage, Robert
Davison, Sir W. H. (Kensington, S.)
Horne, Sir R. S. (Glasgow, Hillhead)


Ashley, Colonel Wilfrid W.
Dawes, James Arthur
Hotchkin, Captain Stafford Vere


Atkey, A. R.
Dewhurst, Lieut.-Commander Harry
Hume-Williams, Sir W Ellis


Baldwin, Rt. Hon. Stanley
Duncannon, Viscount
Hunter, General Sir A. (Lancaster)


Balfour, Sir R. (Glasgow, Partick)
Elveden, Viscount
Hurst, Lieut.- Colonel Gerald B.


Banbury, Rt. Hon. Sir Frederick G.
Eyres-Monsell, Commander B. M.
Illingworth, Rt. Hon. A. H.


Banner, Sir John S. Harmood-
Falle, Major Sir Bertram G.
Jackson, Lieut.-Colonel Hon. F. S.


Barrie, Rt. Hon. H. T. (Lon'derry, N.)
Fell, Sir Arthur
James, Lieut.-Colonel Hon. Cuthbert


Bell, Lieut.-Col. W. C. H. (Devizes)
Fildes, Henry
Jodrell, Neville Paul


Bellairs, Commander Carlyon W.
Fisher, Rt. Hon. Herbert A. L.
Johnson, Sir Stanley


Benn, Capt. Sir I. H., Bart.(Gr'nw'h)
Foreman, Henry
Jones, Sir Edgar R. (Merthyr Tydvil)


Bigland, Alfred
Forestier-Walker, L.
Jones, Henry Haydn (Merioneth)


Blair, Reginald
Forrest, Walter
Jones, William Kennedy (Hornsey)


Borwick, Major G. O.
Foxcroft, Captain Charles Talbot
Kellaway, Rt. Hon. Fredk. George


Boscawen, Rt. Hon. Sir A. Griffith-
Ganzoni, Captain Francis John C.
Kiley, James D.


Brassey, Major H. L. C.
Gardner, Ernest
King, Commander Henry Douglas


Bridgeman, William Clive
Gibbs, Colonel George Abraham
Knight, Major E. A. (Kidderminster)


Briggs, Harold
Gilbert, James Daniel
Knights, Capt. H. N. (C'berwell, N.)


Bruton, Sir James
Gilmour, Lieut.-Colonel John
Lane-Fox, G. R.


Buchanan, Lieut.-Colonel A. L. H.
Gould, James C.
Law, Rt. Hon. A. B. (Glasgow, C.)


Bull, Rt. Hon. Sir William James
Goulding, Rt. Hon. Sir Edward A.
Lewis, Rt. Hon. J. H. (Univ., Wales)


Burn, Col. C. R. (Devon, Torquay)
Grayson, Lieut.-Colonel Sir Henry
Lister, Sir R. Ashton


Butcher, Sir John George
Greenwood, William (Stockport)
Lloyd-Greame, Major Sir P.


Campbell, J. D. C.
Greer, Harry
Locker-Lampson, Com. O. (H'tingd'n)


Carew, Charles Robert S.
Greig, Colonel James William
Lorden, John William


Carr, W. Theodore
Guinness, Lieut.-Col. Hon. W. E.
Lort-Williams, J.


Carter, R. A. D. (Man., Withington)
Gwynne, Rupert S.
Lowe, Sir Francis William


Cautley, Henry S.
Hacking, Captain Douglas H.
Lyle, C. E. Leonard


Cayzer, Major Herbert Robin
Hallwood, Augustine
M'Curdy, Charles Albert


Cecil, Rt. Hon. Evelyn (Birm., Aston)
Hall, Lieut.-Col. Sir F. (Dulwich)
M'Donald, Dr. Bouverie F. P.


Chamberlain, Rt. Hn. J. A. (Birm. W.)
Hanson, Sir Charles Augustin
Mackinder, Sir H. J. (Camlachie)


Chamberlain, N. (Birm., Ladywood)
Harmsworth, C. B. (Bedford, Luton)
McLaren, Hon. H. D. (Leicester)


Coats, Sir Stuart
Harris, Sir Henry Percy
Macleod, J. Mackintosh


Cobb, Sir Cyril
Haslam, Lewis
Macnamara, Rt. Hon. Dr. T. J.


Cohen, Major J. Brunel
Hennessy, Major J. R. G.
McNeill, Ronald (Kent, Canterbury)


Colfox, Major Wm. Phillips
Henry, Denis S. (Londonderry, S.)
Macpherson, Rt. Hon. James I.


Collins, Sir G. P. (Greenock)
Herbert, Dennis (Hertford, Watford)
Marriott, John Arthur Ransome


Colvin, Brig.-General Richard Beale
Hewart, Rt. Hon. Sir Gordon
Matthews, David


Conway, Sir W. Martin
Hickman, Brig.-Gen. Thomas E.
Mitchell, William Lane


Cory, Sir C. J. (Cornwall, St. Ives)
Hinds, John
Molson, Major John Elsdale


Curzon, Commander Viscount
Hoare, Lieut.-Colonel Sir S. J. G.
Montagu, Rt. Hon. E. S.


Dalziel, Sir D. (Lambeth, Brixton)
Holbrook, Sir Arthur Richard
Moore, Major-General Sir Newton J.


Davidson, Major-General Sir J. H.
Hood, Joseph
Moreing, Captain Algernon H.


Morison, Rt. Hon. Thomas Brash
Richardson, Alexander (Gravesend)
Thomas, Sir Robert J. (Wrexham)


Morrison, Hugh
Roberts, Sir S. (Sheffield, Ecclesall)
Thomson, Sir W. Mitchell- (Maryhill)


Mount, William Arthur
Robinson, S. (Brecon and Radnor)
Thorpe, Captain John Henry


Murray, John (Leeds, West)
Rogers, Sir Hallewell
Townley, Maximilian G.


Nall, Major Joseph
Rothschild, Lionel de
Tryon, Major George Clement


Neal, Arthur
Roundell, Colonel R. F.
Ward, Col. L. (Kingston-upon-Hull)


Newman, Colonel J. R. P. (Finchley)
Royden, Sir Thomas
Weston, Colonel John W.


Newton, Major Harry Kottingham
Royds, Lieut.-Colonel Edmund
White, Lieut.-Col. G. D. (Southport)


Nicholson, William G. (Petersfield)
Rutherford, Colonel Sir J. (Darwen)
Whitla, Sir William


Norman, Major Rt. Hon. Sir Henry
Rutherford, Sir W. W. (Edge Hill)
Williams, Lt.-Com. C. (Tavistock)


Norris Colonel Sir Henry G.
Samuel, A. M. (Surrey, Farnham)
Williams, Lt.-Col. Sir R. (Banbury)


Oman, Sir Charles William C.
Sanders, Colonel Sir Robert A.
Williamson, Rt. Hon. Sir Archibald


Palmer, Brigadier-General G. L.
Scott, Leslie (Liverpool Exchange)
Willoughby, Lieut.-Col. Hon. Claud


Pearce, Sir William
Seddon, J. A.
Wills, Lieut.-Colonel Sir Gilbert


Pease, Rt. Hon. Herbert Pike
Smith, Harold (Warrington)
Wilson, Capt. A. S. (Holderness)


Peel, Col. Hon. S. (Uxbridge, Mddx.)
Smithers, Sir Alfred W.
Wilson, Daniel M. (Down, West)


Pennefather, De Fonblanque
Stanier, Captain Sir Beville
Winterton, Major Earl


Perkins, Walter Frank
Stanley, Major H. G. (Preston)
Wolmer, Viscount


Pollock, Sir Ernest M.
Starkey, Captain John R.
Wood, Hon. Edward F. L. (Ripon)


Preston, W. R.
Stephenson, Colonel H. K.
Wood, Sir J. (Stalybridge & Hyde)


Prescott, Major W. H.
Stewart, Gershom
Woolcock, William James U.


Pretyman, Rt. Hon. Ernest G.
Strauss, Edward Anthony
Yate, Colonel Charles Edward


Pulley, Charles Thornton
Sturrock, J. Leng
Yeo, Sir Alfred William


Purchase, H. G.
Surtees, Brigadier-General H. C.
Young, Lieut.-Com. E. H. (Norwich)


Raper, A. Baldwin
Sutherland, Sir William
Young, Sir Frederick W. (Swindon)


Rawlinson, John Frederick Peel
Sykes, Sir Charles (Huddersfield)



Remnant, Sir James
Talbot, G. A. (Hemel Hempstead)
TELLERS FOR THE NOES.—


Renwick, George
Terrell, George (Wilts, Chippenham)
Lord E. Talbot and Mr. Dudley


Richardson, Sir Albion (Camberwell)
Terrell, Captain R. (Oxford, Henley)
Ward.

7.0 P.M.

Mr. A. WILLIAMS: I beg to move in Sub-section (1, a) to leave out the words "hundred pounds thereof" ["no tax shall be charged on the first five hundred pounds thereof"], and to insert instead thereof the words "per cent. payable as dividend or interest on the share capital of the company."
Important as was the Amendment which we have just dealt with, I think my Amendment deals with a wider field. The Bill as introduced does an injustice to the small man who has an investment which brings him in a small rate of interest, and I seek to have it altered so that the small man whose investment brings him in less than 5 per cent. shall not pay this Corporation Tax. The Chancellor proposes in Section 44 (a) that a corporation shall be allowed to deduct from its profits £500 before it estimates the sum on which it has to pay Corporation Tax. This idea of allowing a corporation to deduct a fixed sum seems to me to be founded on a false analogy. We allow an individual before he pays his Income Tax to deduct £150, or whatever the sum may be, from his income. That was done on the ground that that sum is in a sense a living wage, what he needs to live upon before he should begin to pay direct taxation to the State. But to allow a corporation to deduct £500 from its profits before it begins to pay Corporation Tax is not really analogous, for that £500 is not one man's property, on which he has to live, but is divisible among perhaps two
men, or perhaps 5,000 men. If the Government does not deduct it, it is divisible amongst all the shareholders. Now, the essential fact, to my mind, is that the individual will pay the Corporation Tax and not the corporation. The corporation is, after all, an abstraction, and when we are taxing the corporation, it is not the corporation which pays but the individual, because in the last resort the tax comes down upon the individual. It is unjust for a man who has got a small rate of interest on his investment, under 5 per cent., to have to pay practically a new Income Tax, called Corporation Tax, unless he has an income which is above the Income Tax limit,
I would point out that a small man already pays heavily to the State in indirect taxation. If that indirect taxation were got rid of, as many of us hope it will be some day, then the whole question of making the average citizen pay something directly towards the upkeep of the State would, of course, take on a different aspect and might have to be reconsidered. The Chancellor, however, puts this tax upon the small man who has got a small rate of interest and who has an income below the Income Tax level, and I think that is a hardship. I would like to distinguish between two cases, first where the small man's investment is in an ordinary business, and secondly where it is in one of those fairly numerous businesses where the interest
or dividend on capital is strictly limited in amount, usually limited to 5 per cent. In the cases where investment is in an ordinary limited liability company, I think the operation of this £500 limit will be most unequal, and if it is unequal then it is unjust, for the old maxim is that "Equality is Equity." Take a business with £10,000 capital. An investor in that business is given an exemption until he has got a full 5 per cent. on his investment. If the business has £20,000 capital he is only given exemption up to 2½ per cent. interest, although his holding may be the same, an insignificant sum, perhaps £50 or £100, bringing him in a trifling sum as interest each year. If the business in which he happens to be an investor has a capital of £100,000 then he is only allowed an exemption of one-half per cent. If, on the other hand, it is a very small business, say, with only £2,000 capital, he is allowed exemption up to and until he has received 25 per cent. upon his investment. That is most unequal, and therefore most unjust as between one investor and another.
I turn to the cases where the dividend on capital is strictly limited, for the most part limited to 5 per cent. There the shareholder is hit unless the company is earning actually more than 5 per cent. If it is earning less than 5 per cent., then what I have said before applies, and the shareholder is hit. If, on the other hand, the company is earning a little more than 5 per cent., the shareholder gets his 5 per cent., but other people are affected in different ways. I am thinking of a company which has done a very great work in England in developing, town planning, and improvements in housing. In that case it is strictly laid down that the share holder is only to get 5 per cent. if it is earned. As a matter of fact he has never got 5 per cent. hitherto, and until the 5 per cent. is earned he will, of course, suffer loss under this tax. When the 5 per cent. is earned it is the town and the inhabitants of the town which will lose, because under the constitution of that company they are the residuaries of any profit above 5 per cent. Then I would like to take public utility societies for building cottages. In their case the rents are regulated not to make a profit, in the strict sense of the word, but to make 5 per cent. on the capital, or, since rates of interest have gone up so, it may
be 6 per cent. in some of the newer ones. If you are going to tax the profit earned then it is quite evident that those societies in order to live must charge the tenant a rather higher rent. They cannot exist unless they pay the wages of the capital they use, or at any rate they cannot grow, and therefore to meet this tax they must put on a small increase in the rents of the tenant.
Then you come to the position of cooperative societies. We have argued the general question of co-operative societies, and whether the surplus is profit or not, and I am not going over that ground again. In those societies the shareholder gets his 5 per cent. and no more, and when this tax has been imposed the shareholder will still get his 5 per cent. It is the members as consumers who will be hit. Of course, members are both shareholders and consumers, but their interests as members are very different from their interests as consumers. A comparatively large shareholder may be a small consumer, and the other way about, and the effect of this tax will be that the members as consumers will be hit, and will either have to pay higher prices or accept a lower dividend upon their purchases. Seeing that probably 90 out of every 100 of the members of those societies have incomes below the Income Tax limit, it is going to be a great hardship upon them that they have to pay this Corporation Tax on an investment which only brings them in the very moderate return of 5 per cent. I am not, however, putting the case of co-operative investors here: I am putting the case of small investors of all kinds receiving a small rate of interest. I suggest that the Clause as it stands at present would be an injustice to them. To adopt my Amendment would make it just.
I would like the Committee to consider for two or three minutes the objections which I imagine will be brought against my Amendment. The first of these is, I recognise, of a substantial character. It is that you would have to protect yourself against watered capital. If you are going to allow 5 per cent. it must be 5 per cent. on the real share capital, and not something created fictitiously by an exchange of certificates, or something of that kind. I should be glad to see words introduced which would deal with this; for instance, at the end of my Amendment,
after the words "share capital of the company," might be added, "paid up in cash," or "allotted for consideration." Or, again, the Inland Revenue authority might be able to suggest some other words to guard against that difficulty. I do not think the matter is vital. Then comes the second reason which may be urged against my Amendment. I suppose the Chancellor of the Exchequer will use it. It is that my proposal would mean a loss to the Revenue. I do not think that is a sound argument. I think we have to consider in all these cases whether a tax is just or not. The Chancellor may remember the story of a young American woman who was selling a watch in a shop in which she was serving, and was asking an exorbitant price for it. When asked why she was asking such a high price, she said, "Well, I guess the people want the money." That seems to me to be an argument which we often hear, but it is not a conclusive argument, and though the Chancellor of the Exchequer wants the money he ought to get it in a way which is as just as possible. If he wants to get more money out of this Corporation Tax, then I suggest that a higher rate of profit on taxed dividends would be a better way than by levying it upon small dividends, which, in many cases, belong to small people. When the Chancellor of the Exchequer introduced his Budget, if I understood him aright, he hinted that this Corporation Tax might develop into something like a substitute for the Excess Profits Duty. I submit for his consideration that my Amendment is entirely along that line of thought. It seeks to exempt the dividends of the small investor who cannot really afford to pay and, incidentally no doubt, paves the way to putting a bigger burden upon the larger investors. Above all, I use the argument of justice in support of my Amendment: justice to the small investor, whose investments bring in a small rate of interest. For these reasons I hope the Chancellor of the Exchequer will accept this Amendment, which I commend to him as being entirely along the line of his own thought when he introduced his Budget.

Mr. CHAMBERLAIN: The proposal of the hon. Member, as I think he himself sees, and as a greater portion of his speech plainly shows, is a proposal for an entirely different tax from the one which I have suggested and which is embodied in this
Bill. The idea of the tax in the Bill is a flat rate of tax on the profits of these companies, to be treated by these companies as one of the expenses for which they have to provide as a condition of carrying on. It is true that we propose an exemption of the first£500 profit made in an accounting period of 12 months. That is to eliminate the cases where there are very small profits, and where therefore there would be hardly any tax, and the return would not be commensurate with the trouble given to the collector and to the taxpayer. The hon. Member who moved the Amendment suggests that that basis should be abandoned, and that instead I should tax profits in excess of a certain standard, and he goes on to suggest, what, of course, he cannot put in his Amendment by the rules of the House, that we should graduate the tax on the profits in excess of that standard, in order, by taking a larger sum from a higher proportion of profits paid on the higher rate, to produce sufficient from that sum to compensate us for the loss made by adopting the proposal embodied in his Amendment If we carried out that policy it would not be a Corporation Tax at all. It would be a tax on business profits in excess of a certain standard, graduated according to the percentage of profit borne to capital in a business. That is a proposal which I have always thought to be well worthy of consideration. It is one which the Government worked out in considerable. detail last year as a possible alternative to the Excess Profits Duty, but it is not one that would be universally accepted—as I have good reason to know—as a satisfactory alternative, and it is a wholly different tax from the one now proposed to the Committee. As the Amendment is drawn it is open to the objection—which the hon. Member himself foresaw—that it puts a premium on watering your capital so as to make your capital such an amount that your profits do not exceed the tax. free 5 per cent. The hon. Member suggests that we might meet that by the words he suggested. Suppose those words were effective for that purpose, they would still leave the difference between a business which have been re-capitalised the day before the tax came into operation, and a business that was to be re-capitalised the day after the tax came into operation.

Mr. A. WILLIAMS: indicated dissent.

Mr. CHAMBERLAIN: Oh, yes, certainly that is so. I think the hon. Gentleman suggested the words, "Paid up in cash" or "Allotted for consideration." Take the same capital, the same return, and so on. A business is sold to a new purchaser; they pay cash for it, they pay for the goodwill. In other words, the goodwill is capitalised, and thereupon their capital is repaid by cash received or by the cash paid by the succeeding owners. It may become twice, thrice, or four times that of the capital which exists in the other case. The hon. Member's words would certainly be effective for his own purpose, but to take the Amendment as it stands would be to destroy this tax without being able to produce a tax which would be an ideally fair one. If such a tax is ever to be proposed in this House it needs much more careful elaboration, and cannot be done by a small Amendment to a Clause dealing with an entirely different proposal. It would have to be a Section of the Bill itself. Therefore I fear I must resist this proposal and other similar proposals on the Amendment Paper, although no doubt some of them will not now be moved.

Mr. HOLMES: I am not surprised that the Chancellor of the Exchequer has refused this Amendment, and I think he is quite right to do so as it stands, but I would like to make a suggestion with regard to it. In the first place, with regard to capital, the Chancellor of the Exchequer referred to the question of watered capital. I think that could be easily got over. Every business has got its capital fixed by the Excess Profits Duty rules. No watering of capital could take place there. No existing company has been able to increase its capital since 1914, except by paying in fresh money, or by leaving its profits undrawn. There would be no difficulty whatever in getting over that point by putting in the Excess Profits Duty capital.

Mr. CHAMBERLAIN: Surely that would not guard against the effect of recapitalisation—the sale of existing companies and recapitalisation.

Mr. HOLMES: If the right hon. Gentleman would consult his authorities at Somerset House he will find they will not recognise any capital of a company where that capital is goodwill alone. I think the mistake which the Mover of this Amendment made was in trying to give exemp-
tion from the Corporation Tax of 5 per cent. on the capital of any company, because where a company makes 15 or 20 per cent. there is no necessity at all to give that company an exemption of 5 per cent. What I think the Chancellor of the Exchequer might do would be to say that, where a company on its capital does not make more than 5 per cent., it should be free from the Corporation Profits Tax. The Chancellor of the Exchequer has already limited the amount that any company should pay. He says that the tax shall not exceed a certain amount. Let him also say that, if the total amount of profits in any one accounting period of a year does not exceed 5 per cent. on the capital as computed under the Excess Profits Duty rules, no Corporation Tax shall be payable. That means that in a case of a business that is making 5 per cent. the profits received by the shareholders would not be reduced below 5 per cent. by the Corporation Profits Tax. I think the Amendment is unreasonable as it stands.

Mr. CHAMBERLAIN: The hon. Member is under a misapprehension. I have verified it by a reference to authorities on the subject. If you want to adopt the basis which he suggests you have to go through the whole machinery of ascertaining what the capital is. That has been the great objection that the industrial community has raised to any proposal for a tax on the lines suggested by the hon. Member.

Mr. MacCALLUM SCOTT: I do not know whether the right hon. Gentleman proposes to move the Closure on this discussion. He has recently introduced the principles of moving the Closure. I do not think it has generally been done, unless for the purpose of expediting business, and I hope he will not again resort to it. He has pointed out that if this Amendment were carried the effect it would have upon the tax would be that it would no longer be a Corporation Tax, but would become some other kind of tax. I think it would become a kind of Excess Profits Tax, with a datum line of 5 per cent. If the right hon. Gentleman objects to the Amendment on the ground that it would longer be a Corporation Tax, I think he will be bound to recognise that the same objection applies to the proposal which is contained in his own Bill. It is not a tax levied on all corporations. It is a tax levied on pro-
fits, and only on those corporations which make a profit. A Corporation Tax is one which is levied upon corporations, and which represents some contribution which they make to the State for the privilege which is accorded to them of trading as limited companies, whether they make a profit or not. The tax which the right hon. Gentleman has proposed is an Income Tax limited to certain incomes, and an Income Tax which is not subject to the ordinary abatements and exemptions granted to ordinary Income Tax. I think that is what my hon. Friend (Mr. Williams) has in mind in moving this Amendment. He desires to make some provision for the case of the small man with a small income who secures some exemptions and some abatements from Income Tax, but under the Income Tax which is proposed in this Clause does not secure any exemption or abatement It is an effort to meet that case. I do not think it really does meet it. It does not meet it adequately. So far as the two proposals are concerned, that made by the right hon. Gentleman and my hon. Friend's Amendment, it is really a case of six of one and half-a-dozen of the other. The Amendment is liable to some special objections. The machinery would be more difficult, and the opportunities for evasion would be more frequent. It would be well in theory, and it sounds a little more fair, but it would be a much more difficult tax to enforce and apply, and although I sympathise with the ground on which I conceive it to be moved, I regret that it is not one which I could support. There are other matters referring to the proposal itself, but it would be a much more convenient occasion to raise them when we come to the question that the Clause stand part.

The CHAIRMAN: I should like to make a suggestion to the Committee. It is clear that the present Amendment does not really raise the issue that hon. Members desire to get at. On the other hand, if it is debated and negatived, I shall be bound to hold that it will shut out some subsequent Amendments. Would it not be better, if agreeable to the hon. Member, to pass from this Amendment and come on to Amendments which raise the issue rather more specifically?

Mr. MacCALLUM SCOTT: If my hon. Friend wishes to take a vote, might I suggest that it might be taken in the form that these words be inserted later
in the Sub-section, and that would not cut out the subsequent Amendment?

Mr. G. BALFOUR: If the Amendment is taken now, I should desire to speak to the Amendment later on on the Paper. I think this Amendment raises the principle and the later Amendment includes the principle which is involved in this Amendment, so the whole principle involved in this Amendment could be taken also as included in the principle in my Amendment.

The CHAIRMAN: That is a point that occurred to me. It was the hon. Member's Amendment that I was referring to. It is not open to some of the objections involved in the present one, and I was anxious, if I could, to protect it.

Sir D. MACLEAN: It would assist the Committee very much if you, Sir, would indicate which of the subsequent Amendments, in your judgment, raises the question in a better form than the one we are now discussing.

The CHAIRMAN: Supposing this Amendment be withdrawn, I hardly think the Amendment next following raises the very practical point. After that, I propose to call the hon. Member for Yarmouth, then the hon. Member (Mr. Balfour) to leave out the word "-actually," and the one next following in the name of the hon. Member for North East Derbyshire. In fact, all the next five or six Amendments raise really business points which might be considered.

Mr. WILLIAMS: I have no desire to stand between hon. Members and the decision of the Committee on particular Amendments, and it is quite evident that the Government is not going to accept my Amendment. I wish to say that I did not intend, in putting this forward, to put forward an entirely different substitute for the right hon. Gentleman's tax. I suggested that I thought he had something of that kind in his mind, and my Amendment might be a step in that direction. I only intended to offer it as an abatement from the tax in a different form. After what you and other hon. Members have said, I ask leave to withdraw.

Amendment, by leave, withdrawn.

Sir A. FELL: I beg to move, in Subsection (1, b), leave out the word "ten" ["represented by ten per cent."] and to insert instead thereof the word "five."
I shall have to go a little more broadly into the question of this and state, what I believe is not generally known, what the nature of the tax is. It is a tax of 5 per cent., or 1s. in the £, on the profits of all companies—not only limited, but statutory companies. It will rise by various stages up to 2s. in the £ according as the company or corporation has debenture and preference shares ranking in front of the ordinary shares The tax will fall entirely on the ordinary shares and it will rise in proportion to the amount the ordinary shares bear to the total capital of the company. If the ordinary shares represent about a half and the debenture and preference shares represent the other half of the capital, as there is 1s. on the whole of the return of that capital, as it is not taken off the debenture or preference shares, the whole of it is taken from the ordinary shareholders. It would amount then to 2s. in the £ and it is limited by this Subsection to 2s. in the £. I heard the other day of a company which had only one-fifth of its capital in ordinary shares and the other four-fifths was in debenture and preference shares. It is a large, well known and very profitable company. The ordinary shares in that case will bear the whole of this Corporation Tax, and if it was not limited by this Clause they would pay a tax of 5s. or 6s., and when that was deducted they would have to pay 6s. Income Tax, so they would pay about 11s. in the —. I suggest that the Clause should be altered and that it should be made a flat rate of 5 per cent. and not 2s. or 1s. 6d. or some other varying sum which it will be under the Bill as it stands. For instance, when you are buying shares in a company you will have to ask whether the tax will be 1s., or 1s. 6d., or 2s., and the broker will have to find out the best way he can how much debenture and preference shares there are in front of the ordinary shares. In one case he will say there are no debentures in front of it, like an ordinary rubber company, and the Corporation Tax will only be is. in the £. In another case he will say it will be 2s. in the £, and with Income Tax
that will be a very serious thing, and it will very materially affect all companies.
The Joint Stock Acts of Great Britain have done more to assist trade and business in the last 50 years than any other Act of Parliament that has ever been passed and those Acts have formed a model for similar Acts to control or regulate the business of companies throughout the English-speaking world. They are adopted in practically all the Colonies, and now we are going to a totally different tax, that tax having proved so successful and having worked so well and under it English trade having grown up as it has and developed the whole world, and we are now going to put on an extra tax which will, I believe, in the future most materially hamper trade. The ordinary shareholder is the one man whom the Government should encourage to put his money into enterprise. He is the man who has built up our trade everywhere, not the debenture holder. He has found the money which has started all the enterprises which have built up the British Empire. The debenture holders can take care of themselves; they are only creditors. If such a tax as this is put upon the ordinary shareholders alone the future of our British limited liability companies will be very seriously affected. This is class legislation. Two people who have both invested in a company, and who may be neighbours, pay in the one case 6s. in the £ Income Tax, and in the other 8s. in the £, because they have taken a different kind of stock in the company, one preference or debenture stock and the other ordinary stock. It is quite wrong that in the one case a man should pay 6s. and in the other 8s. I do not think it has been understood what this really means. I remember hearing the Chancellor of the Duchy of Lancaster at one time saying in this House that you cannot tax the man with red hair any more than you tax the man with black hair, but that we must tax all alike. You are not taxing all alike in this case. You are taxing one man more than another man in the ways I have indicated.
It was pointed out by a previous speaker that this tax means an immense hardship upon people of moderate means, who will not be able to get any abatement. There are many people in this country who are drawing small incomes from railway shares, incomes of £200 a year or so, which have been left to them by their parents, and they are living on
these incomes. Now this tax comes along, and they will have to pay an Income Tax of £20 out of their £200, quite apart from the ordinary Income Tax of 6s. in the £, which, of course, they will be able to get back. The £20 they will not be able to get back. It seems to me that this tax was put forward as a kind of substitute for the extra Excess Profits Duty, and that if the extra 20 per cent. Excess Profits Duty was not to be put on, this tax would act as a sort of substitute for it. I believe it was suggested with the idea of catching people who are avoiding Super-tax. The Treasury are perfectly able, if they wish, to catch people who are avoiding Super-tax, and it seems to me absurd that, in order to catch that small class of people who are trying to avoid Super-tax, they should tax an enormous volume of shareholders in our public utility companies and in our railway companies, electric light undertakings and waterworks to the extent of from 1s. to 2s. in the £, solely because a few people may have escaped Super-tax in private limited companies in which they own all the stock. There must be some different justification given before we can pass such a new tax as this, which will materially interfere with enterprise.
There will be many concerns in England which will transfer their head offices from London to the Colonies or to the countries where they are doing their business if this tax is persisted in. I refer particularly to a large number of railway companies in the River Plate, representing hundreds of millions of capital belonging to English shareholders. I have examined a good many of these companies, and if the ordinary shares are to be taxed an additional 2s. in the 2, this extra Income Tax will undoubtedly have the effect of causing them to transfer their head office elsewhere. I cannot imagine that all these great concerns can continue to stay in London and pay a double tax, which brings their tax up to 8s. in the £. It is not in the interests of this country that we should force these companies to transfer their head offices from London to the countries where they are doing their business. I could inform the Chancellor of the Exchequer of some companies that will do so; they will be obliged to do it because they cannot pay the extra 2s. tax. If this tax is to be
imposed, I suggest that the right hon. Gentleman should make it a fixed tax of not more than 1s. He would then do something to meet the position, but if there is to be an indefinite tax of from 1s. to 2s. hanging over the ordinary shareholder, it will make his position intolerable. If the tax was fixed at 1s., I suppose it would have to be endured; the shareholders would then realise that, instead of getting 20s., they would get 19s., and they would also have to pay their 6s. tax.

Mr. RONALD McNEILL: On a point of Order, Mr. Whitley. When my hon. Friend opposite withdrew the last Amendment, he did so because you said that there was an Amendment lower down on the Paper which raised the same question in a wider form. I understood that my hon. Friend (Sir A. Fell) was going to move the Amendment in his name which raised the same point, namely, whether or not the £500 of exempted capital is sufficient, but when he rose he said he was not going to move that Amendment, and he passed on to a totally different part of the Clause, dealing with an entirely different matter. Is there any Amendment to be moved which will raise the point in question? I should have risen to address you on the Amendment of my hon. Friend opposite if I had not understood that my hon. Friend (Sir A. Fell) was going to raise it in his Amendment.

The CHAIRMAN: I indicated that the Amendment of the hon. Member for Hampstead (Mr. G. Balfour) raised it in a better form, namely, that it should be 6 per cent. instead of 5 per cent.

8.0 P.M.

Mr. CHAMBERLAIN: I should have felt more impressed by the doleful prognostications of my hon. Friend (Sir A. Fell) if I had not heard them on every Budget, or nearly every Budget, since I have sat in this House, on every occasion when there has been necessity for increasing taxation. I recognise that as you raise the burden of taxation pro tanto you do increase the danger that enterprise may be removed elsewhere, if the burdens elsewhere are not also rife. That is only one of the considerations which affect the domicile or place of management of businesses. The advantages of London are so great that I am not as much alarmed as my hon. Friend. I hope and believe that his very gloomy prognostications are mistaken,
and so I am certain are his fancy accounts of the interviews which he or others will have with their brokers as to the exact effect of this proposal before they purchase shares. I suggest that he need not consult his broker for that purpose. If he will look at the market quotations he will see the effect on the value of the shares. My hon. Friend misconceives the whole purpose and scheme of the tax. I despair of convincing him, as I have dealt with this matter more than once. What I say passes off his mind like water off a duck's back. It may be the fault of the water in this case. I must not blame my hon. Friend unnecessarily, but I rather despair of making clearer to him than I have done what is, in my opinion, the misconception under which he labours. Though I cannot accept my hon. Friend's gloomy views, I am prepared to go some way to meet the case which he has in mind.
Perhaps it will be for the convenience of the Committee if I very briefly indicate now the Amendments which I think are germane to the discussion which my hon. Friend has initiated. In the first place, there is an Amendment on the Paper in the name of the hon. Member for North-East Derbyshire (Mr. Holmes), in paragraph (b), to leave out the words "being shares which do not confer on the holders thereof any right to participate in profits beyond the right to receive dividends at the fixed rate," and to insert instead thereof the words "(so far as the dividend paid thereon is at a fixed rate)." I am prepared to accept that. It gives to that portion of the dividend on such shares, which is a fixed dividend, the same terms as to fixed payments on debentures or other forms of shares. But there is a wider issue. My hon. Friend is specially concerned with the case of public utility companies, including in that term railways. A good many Members have shown special interest in these cases, and I have considered them as carefully as I can. I do not believe that if something in the nature of the Corporation Tax remains a permanent part of our system, that if it is approved by Parliament and accepted by the country, it would be possible to exclude those companies permanently from its scope. At the same time, I recognise that their position at the present time is a very peculiar one. They cannot adjust themselves to a new
business expense thrown upon them, and that is what this tax is. It is not a deduction from the dividend of the individual shareholder, but an additional business expense put upon the business. They cannot adjust themselves to that in the same way that a business can which is not subject to the conditions under which they are working. These companies are, nearly all of them at the present time, either the subject of legislation now before the House, or of proposed legislation which is to be brought before the House as soon as possible, intending to enable them to adjust their circumstances to the new conditions which the War has produced, or, in other words, to adjust their charges and the terms of their business to the increased cost which has come about in consequence of the War. In these circumstances I have come to the conclusion, after the best consideration I could give to the matter, that it would not be fair or right—I could not justify it in Debate—to bring the Act into immediate operation as regards these companies. If, as I hope, it will meet the views of those hon. Members who have put down these numerous Amendments, and who are interested in this matter, I shall be prepared to bring up words on Report—I am sorry to say I have not the words ready now—to suspend the operation of the tax in respect of that class of com pany for a period of three years, by which time conditions will be settled, the legislation contemplated will have been passed, and Parliament can then review the position in the light of the then existing circumstances and of any changes that have been made. I hope I have not trespassed beyond the limits of order, but I thought that it was for the convenience of the Committee that I should make a statement of this kind, because it does not respond exactly to the Amendment of my hon. Friend. I am sure, from his previous speech, as from his speech to-day, that it pertains to what he had in mind and what is in the mind of a great number of people.

Mr. DENNIS HERBERT: Will the right hon. Gentleman indicate what course he proposes to adopt with regard to the next Amendment?

Mr. CHAMBERLAIN: I could not accept that.

Sir J. BUTCHER: The statutory undertakings to which the right hon. Gentleman has referred are very grateful for the concessions which he has indicated, not only in the interests of the companies themselves and their shareholders, but also because they think it a very great advantage to the public to have exemption from this taxation, at any rate, for three years. If this concession is accepted, I understand it will mean this, that for three years there should be no Corporation or Profits Tax charged upon these public utility companies, but the right hon. Gentleman does not expect those interested in this particular question to pledge ourselves that at the end of three years we shall accept this tax and it would be open to us and every other Member of the House then to give our views either in favour of this tax or against it.

Mr. CHAMBERLAIN: I thought I had made it quite plain that it would give an opportunity to the House to review the position of these companies in relation to the tax in the light of the then existing circumstances and of the legislation that might be passed in the meantime.

Mr. McNEILL: On a point of Order. May I ask whether an hon. Member who may have any observations at all to make on the statement which my right hon. Friend has just made can make them now? Strictly speaking, they seem entirely out of Order on the present Amendment. The right hon. Gentleman forecasted what he was going to do in reference to further Amendments. Should a discussion on the matter take place now or should we wait until he intimates the particular Amendment he is going to accept?

The CHAIRMAN: If we dispose of the Amendment of the hon. Member now we can come on to the actual spot.

Mr. BIGLAND: As far as I understand, the Chancellor intends to write off all cash, that is income raised by any debenture or any preference shares, and tax us to the full on the ordinary shares. That seems to me to be quite unfair. I know many companies where all the shares are ordinary shares, and they count on getting a big overdraft from the bank instead of debenture bonds. In the one case the shareholders will pay 2s in the pound. In the other case they will only pay a shilling in the pound. [HON. MEMBERS: "No!"] I am a business man and I
am talking about what I know. Many bankers will give an open credit—I am not talking of permanent loan on property, but of the ordinary current loan that is often given. This is a very unfair tax, and I would put it to the Chancellor that he has not quite weighed up the arguments of my hon. Friend the Member for Yarmouth, because it is manifestly unfair that certain companies should pay 2s. in the pound and others only 1s. I think it important that my hon. Friend should push this to a Division because the other matter that comes up is not really germane to this particular Amendment. It comes up much better with regard to the Amendment of the hon. Member for Hampstead (Mr. Balfour). In reference to what the Chancellor said about stockbrokers in my opinion the confusion on the Stock Exchange will be dire. Every broker will have to find out and say to his client, "This is a 5 per cent., and you have to pay 2s. in the pound on any dividends you get from that corporation." It will work great confusion. It is a bad tax in any case, but if it is passed at all certainly it should be a straight flat 5 per cent. on the ordinary shares of every company.

Mr. MacCALLUM SCOTT: My right hon. Friend has, I think, drawn a red herring across the trail of this Amendment. The references which he gave to future Amendments, especially with regard to statutory companies, have no relation to this Amendment and do not affect it and do not grant the relief which is desired. I hope that my hon. Friend will persist in his Amendment and go to a Division. My right hon. Friend referred to his speech as a doleful speech, but he omitted altogether to reply to the main gravamen of it. The case that appeals to me most strongly is this. We are dealing here under the name of Corporation Tax with a tax of 1s. in the pound on certain incomes, a tax without any abatement or exemption on small incomes. Under this Clause it is proposed that in certain conditions this tax of 1s. in the pound may be doubled. That is that very small investors, who may only have an income of £100 a year, and who would get complete exemption from ordinary Income Tax, do not get any exemption from this Income Tax of 2s. in the pound. That is a hardship, and should be resented all the more because it is thought to come in the way of a
snare. It does not come in the shape of An honest, straightforward proposal, but tomes by a side wind, and people as a whole will not generally realise what has happened to them until the demand for this Income Tax is presented to them. There are not many of the Amendments which I am inclined to support, because I object to the tax as a whole on account of its method of assessment, though I do not object to a Corporation Tax. But this Amendment I do support because in the case of small incomes it does give some small relief.

Mr. McNEILL: I agree entirely with what my hon. Friend has just said about the difficulty of knowing what is going to be done on future Amendments. If I could be certain that the Bill is going to stand as it now stands, I should have no hesitation in supporting the Amendment before the House. But I think that it would be very much modified if the proposal of my hon. Friend the Member for Hampstead were accepted, because that would apply in some measure exemption for the small incomes to which my hon. Friend has just referred. Of course, he is quite right. Whatever you may call it, it is in point of fact an Income Tax, and obviously, as in the case of every other Income Tax, there should be exemption for the small income. The difficulty that I am in is that if I could be quite certain that the Amendment which my hon. Friend is about to propose was going to be inserted in the Bill, then I would think that the present Amendment would be unnecessary, but in the state of uncertainty in which we all must be until we have a definite statement from the Government, I am inclined to urge my hon. Friend to divide upon this.

Mr. A. WILLIAMS: The Chancellor of the Exchequer has stated that he proposes to give three years' exemption to certain public utility companies. How far does he intend to extend that? There are public utility societies as well as public utility companies which are strictly limited as to what dividend they can pay. Is he going to give this three years' exemption to these public utility companies and deny it to these working-class organisations whose dividends are also strictly limited—mutual building societies, provident societies, public
utility building societies, and other organisations of that kind? If the exemption is going to be given to enterprises of a purely capitalistic character, and not to working-class organisations, there would be very serious discontent aroused in the country.

Mr. PRETYMAN: I hope my hon. Friend will not withdraw the Amendment; if he takes it to a Division I will support him in the Lobby. The Amendment is to limit this tax to 5 per cent. as a maximum, whereas it is proposed in the Bill that it may amount to 10 per cent. as a maximum. I agree that it is nothing but an Income Tax. After having sat for over a year and a half on a Royal Commission, and having spent laborious days and weeks and months in trying to equalise the Income Tax and to apportion it exactly, with abatements and exemptions according to the ability of the taxpayer to bear it, and also after having dealt with the difficult question of Double Income Tax, here in the very same Bill in which our particular recommendation is being adopted, we have another Double Income Tax proposed without any exemptions or abatements. I object to this tax on that ground. The announcement of the Chancellor of the Exchequer of the exemption of statutory companies and public utility societies, although I think it would be a great help to us if we had had that a little more clearly defined, and if we knew what companies were to be included and what not included, merely accentuates the hardship of piling 5 per cent. or 10 per cent. on certain selected people. If it is intended to deal with the question of Super-tax avoidance through accumulated reserves, the tax does not meet the case at all. The Super-tax payer may just as well be the owner of debenture or preference shares as of ordinary stock, and in that case he will not pay anything. The tax appears to have the great vice of an Income Tax without any graduation or abatement, and is placed upon particular people in varying degrees without any sort of reference to their ability to pay, but merely because of the particular method in which the capital of the companies in which their money is invested happens to be distributed.
Take the case of two individuals of absolutely equal ability to pay and with
exactly similar investments, one in a company whose capital happens to be distributed in a certain proportion between preference and debenture stock and ordinary stock and the other in a company which happens to have a different proportion of distribution. One would have to pay twice as much tax as the other. That is neither fair nor reasonable. The tax seems to have been hastily conceived to carry out certain objects. However good those objects, it is not sound finance to commit a great error and to start on a slippery slope of unfair taxation on a very large scale, merely to meet some comparatively minor question of evasion of or difficulty, which is of far less importance than the evils which this tax will impose on the country.

Mr. PRESTON: Personally I am against this tax, and I hope the Government will see their way to withdraw it. If we must have the tax, I hope they may see their way to accept the Amendment, and for a reason which has not been put forward so far. Many of us who are interested in industry are endeavouring to improve the relations between capital and labour by persuading the workmen to take up ordinary shares in the company in which they work. The men are very suspicious about doing it, but a lot of them have made such investments. Many of these men are not liable to Income Tax. They would be liable under this proposal. They would then turn to the employer who had persuaded them to invest and they would say, "You deceived us, and now we have to pay an Income Tax of at least 1s. in the £1, and very likely a good deal more." It would be bad enough for a master to face his men if they had to pay a tax of 1s. in the £ which they had not anticipated, but I happen to be an unfortunate individual mixed up with a company in which, owing to the strong proportion of preference stock and preferred stock, the ordinary shareholder will pay considerably more than 1s. in the £ tax under this scheme.

Mr. BARTLEY DENNISS: On behalf, I may say, of almost the whole of the cotton trade of Lancashire, I oppose this tax, and therefore support the Amendment. I do not know whether my right hon. Friend understands that nearly all the mills in Lancashire and nearly all the cotton companies have very small
share capital indeed, and that they work the whole of their business on borrowed money. The workpeople themselves lend the money to the mills. This Clause, if it passed, would impose 10 per cent. on the whole of the profits of these companies. I do not suppose the right hon. Gentleman knows as well as I know the enormous number of working men who are shareholders in the cotton trade. It is a thing to be encouraged; it is one of those which make our constitution stable and render it unlikely that Bolshevist ideas will take root and prevail in this country at any time. Those people do not pay Income Tax. Under this proposal some of them will pay Income Tax for the first time without any repayment whatsoever. For a miserable £3,000,000 a year there is being introduced a tax which, I predict, will grow and grow and grow year after year, and be regarded as a fruitful source of income by the Government. It is limited strictly to those people who happen to have invested their money in limited liability companies. Why did not the Government allow those people to have some sort of notice that this tax was going to be imposed, so that they might change their investments? Why is this class of people to be singled out for the payment of an extra Income Tax?
Did not the Chancellor of the Exchequer say the other day that the Income Tax had already reached its limit, that 6s. in the £ was as much as it was possible to impose on the people of this country, and that if he put on more not only would he get a less amount of tax, but the unfortunate people who had to pay it would in many instances be unable to bear it? Yet now you are putting on an extra 10 per cent. in this Clause on those very people and letting off everybody who has invested money in land, or in houses, or in private firms. This sort of tax also tends to drive money out of the country. Particularly on behalf of the cotton trade in Lancashire, which will be hit by this Clause and helped by this Amendment, I shall vote against the Government. I want to ask the right hon. Gentleman to drop the tax altogether. It is a bad principle and a principle which will, I am sure, do more to injure the trade of this country than any tax that has ever been introduced in this House. It is far worse in principle than the Excess Profits Duty, because it excludes the whole of one class
and places the burden entirely on those who have invested their money in limited liability companies. If it were ever thought proper to tax corporations of this description when the Limited Liability Companies Act of 1867 was first passed, and when the numerous amending Acts since then were passed, some provision would have been made in them for taxing the profits of limited liability companies, but the public have gone on in the confidence that they would never be obliged to pay a double Income Tax on money invested in these companies. I therefore support the Amendment.

Major ENTWISTLE: As one who opposed the Excess Profits Duty as being a very bad tax, I feel that a word or two ought to be said in favour of this tax, which to my mind avoids a very great many of the evils involved in the other tax. We have heard all the arguments against this tax, as if it is based on the assumption that where a company has debentures and preference issues the ordinary shares are especially penalised by being taxed at 10 per cent. instead of 5 per cent.; but that is not representing the position correctly. The tax on these companies is the same. It is 5 per cent. on the profits which are made, but as a concession to those companies which have large preference or debenture issues it is said that the net profits which are attributable to the ordinary shares shall not be taxed at more than 2s. in the £, so that it is a concession. The hon. Member who spoke last referred to the cotton trade, and said that workpeople invested their money in loans, and I cordially agree. I know a little of the cotton trade myself, but I suggest to him that he did not select a very good example, because

if he will notice interest on borrowed money is allowed as a deduction unless it is a permanent loan, and the definition of a permanent loan is one which is repayable at not less than three months' notice. Now the majority of the loans in the cotton mills are payable at less than three months' notice, so that they would be allowed as a deduction.

As regards the debenture and preference shares, when a business is started and you have to consider what capital you are going to get, you can either form your business and provide all the necessary money by ordinary shares, or you can at your option have some of that in debenture and preference shares. The advantage of having debenture and preference shares is that you get cheap money, and the result of that cheap money is that there are far more profits which are left over for the ordinary shares, and they get the benefit, and surely they ought not to grumble because they have to pay the same rate of Corporation Profits Tax on the profits as if those debentures and preference shares had not been issued, but they get a concession, that they shall not have to pay, however big the debenture and preference issue by which they are getting cheap money, on the net profits more than 10 per cent. I think that is a very reasonable provision, and I think the light in which it has been put by several hon. Members is one which does not convey a proper impression. I therefore hope the Government will stick to this tax and get rid of the Excess Profits Duty.

Question put, "That the word 'ten' stand part of the Clause."

The Committee divided: Ayes, 185; Noes, 52.

Division No. 206.]
AYES.
[8.34 p.m.


Adair, Rear-Admiral Thomas B. S.
Bowerman, Rt. Hon. Charles W.
Davidson, Major-General Sir J. H.


Addison, Rt. Hon. Dr. C.
Brace, Rt. Hon. William
Davies, Thomas (Cirencester)


Adkins, Sir W. Ryland D.
Bramsdon, Sir Thomas
Dawes, James Arthur


Ainsworth, Captain Charles
Briggs, Harold
Dewhurst, Lieut.-Commander Harry


Armitage, Robert
Broad, Thomas Tucker
Duncannon, Viscount


Baird, Sir John Lawrence
Brown, James (Ayr and Bute)
Edwards, C. (Monmouth, Bedwellty)


Baldwin, Rt. Hon. Stanley
Bruton, Sir James
Edwards, Major J. (Aberavon)


Balfour, Sir R. (Glasgow, Partick)
Burn, Col. C. R. (Devon, Torquay)
Entwistle, Major C. F.


Barnes, Rt. Hon. G. (Glas., Gorbals)
Campbell, J. D. G.
Eyres-Monsell, Commander B. M.


Barnston, Major Harry
Cape, Thomas
Falcon, Captain Michael


Barrand, A. R.
Carew, Charles Robert S.
Flannery, Sir James Fortescue


Barrie, Rt. Hon. H. T. (Lon'derry, N.)
Carter, R. A. D. (Man., Withington)
Ford, Patrick Johnston


Beckett, Hon. Gervase
Carter, W. (Nottingham, Mansfield)
Foreman, Henry


Bell, James (Lancaster, Ormskirk)
Casey, T. W.
Fremantle, Lieut.-Colonel Francis E.


Betterton, Henry B.
Chamberlain, Rt. Hn. J.A.(Birm.,W.)
Ganzoni, Captain Francis John C.


Blair, Reginald
Clay, Lieut.-Colonel H. H. Spender
Gardner, Ernest


Blake, Sir Francis Douglas
Cobb, Sir Cyril
Gibbs, Colonel George Abraham


Blane, T. A.
Cohen, Major J. Brunel
Gilmour, Lieut.-Colonel John


Borwick, Major G. O.
Conway, Sir W. Martin
Goulding, Rt. Hon. Sir Edward A.


Boscawen, Rt. Hon. Sir A. Griffith-
Coote, Colin Reith (Isle of Ely)
Graham, D. M. (Lanark, Hamilton)


Graham, R. (Nelson and Colne)
Law, Alfred J. (Rochdale)
Sexton, James


Grant, James A.
Lister, Sir R. Ashton
Shaw, Thomas (Preston)


Grayson, Lieut.-Colonel Sir Henry
Lloyd-Greame, Major Sir P.
Short, Alfred (Wednesbury)


Green, Joseph F. (Leicester, W.)
Locker-Lampson, Com. O. (H'tingd'n)
Sitch, Charles H.


Greenwood, William (Stockport)
Loseby, Captain C. E.
Smith, Harold (Warrington)


Greer, Harry
Lunn, William
Spencer, George A.


Griffiths, T. (Monmouth, Pontypool)
Macdonald, Rt. Hon. John Murray
Sprot, Colonel Sir Alexander


Grundy, T. W.
Mackinder, Sir H. J. (Camlachie)
Stanier, Captain Sir Beville


Guest, J. (York, W. R., Hemsworth)
Macleod, J. Mackintosh
Stanley, Major H. G. (Preston)


Hacking, Captain Douglas H.
Mallalieu, F. W.
Stanton, Charles B.


Hailwood, Augustine
Malone, Major P. B. (Tottenham, S.)
Strauss, Edward Anthony


Hall, F. (York, W. R., Normanton)
Moreing, Captain Algernon H.
Sugden, W. H.


Hambro, Captain Angus Valdemar
Morgan, Major D. Watts
Surtees, Brigadier-General H. C.


Hancock, John George
Murray, Lieut.-Colonel A. (Aberdeen)
Sutherland, Sir William


Harmsworth, C. B. (Bedford, Luton)
Murray, Dr. D. (Inverness & Ross)
Sykes, Colonel Sir A. J. (Knutsford)


Harris, Sir Henry Percy
Murray, John (Leeds, West)
Sykes, Sir Charles (Huddersfield)


Hartshorn, Vernon
Murray, Major William (Dumfries)
Taylor, J.


Hayday, Arthur
Myers, Thomas
Thomas, Rt. Hon. James H. (Derby)


Hayward, Major Evan
Neal, Arthur
Thomas, Sir Robert J. (Wrexham)


Henry, Denis S. (Londonderry, S.)
Newbould, Alfred Ernest
Thomson, T. (Middlesbrough, West)


Hirst, G. H.
O'Grady, Captain James
Thomson, Sir W. Mitchell- (Maryhill)


Hodge, Rt. Hon. John
Oman, Sir Charles William C.
Thorne, G. R.(Wolverhampton, E.)


Holbrook, Sir Arthur Richard
Parkinson, John Allen (Wigan)
Tootill, Robert


Holmes, J. Stanley
Parry, Lieut.-Colonel Thomas Henry
Tryon, Major George Clement


Hope, Sir H. (Stirling & Cl'ckm'nn'n,W.)
Perkins, Walter Frank
Waddington, R.


Hope, James F. (Sheffield, Central)
Pollock, Sir Ernest M.
Walsh, Stephen (Lancaster, Ince)


Hope, Lt.-Col. Sir J. A. (Midlothian)
Prescott, Major W. H.
Waring, Major Walter


Hopkinson, A. (Lancaster, Mossley)
Pulley, Charles Thornton
Wheler, Lieut.-Colonel C. H.


Hunter-Weston, Lieut.-Gen. Sir A. G.
Purchase, H. G.
Whitla, Sir William


Hurst, Lieut.-Colonel Gerald B.
Ramsden, G. T.
Wigan, Brig.-General John Tyson


Illingworth, Rt. Hon. A. H.
Renwick, George
Wignall, James


Irving, Dan
Richardson, Sir Albion (Camberwell)
Williams, Lt.-Col. Sir R. (Banbury)


James, Lieut.-Colonel Hon. Cuthbert
Richardson, Alexander (Gravesend)
Wills, Lieut.-Colonel Sir Gilbert


Jephcott, A. R.
Richardson, R. (Houghton-le-Spring)
Wilson, W. Tyson (Westhoughton)


Jesson, C.
Robertson, John
Winterton, Major Earl


Jodrell, Neville Paul
Rodger, A. K.
Wintringham, T.


Johnson, Sir Stanley
Roundell, Colonel R. F.
Wood, Sir J. (Stalybridge & Hyde)


Jones, Sir Edgar R. (Merthyr Tydvil)
Royce, William Stapleton
Yeo, Sir Alfred William


Jones, Henry Haydn (Merioneth)
Royden, Sir Thomas



Jones, William Kennedy (Hornsey)
Samuel, A. M. (Surrey, Farnham)
TELLERS FOR THE AYES.—


Kellaway, Rt. Hon. Fredk. George
Sanders, Colonel Sir Robert A.
Lord E. Talbot and Mr. Dudley


King, Commander Henry Douglas
Seddon, J. A.
Ward.


Larmor, Sir Joseph
Seely, Major-General Rt. Hon. John



NOES.


Agg-Gardner, Sir James Tynte
Hohler, Gerald Fitzroy
Pennefather, De Fonblanque


Astbury, Lieut.-Commander F. W.
Hood, Joseph
Preston, W. R.


Bagley, Captain E. Ashton
Hurd, Percy A.
Pretyman, Rt. Hon. Ernest G.


Brassey, Major H. L. C.
Johnstone, Joseph
Rae, H. Norman


Bull, Rt. Hon. Sir William James
Kidd, James
Raffan, Peter Wilson


Clough, Robert
Knights, Capt. H. N. (C'berwell, N.)
Ratcliffe, Henry Butler


Cory, Sir C. J. (Cornwall, St. Ives)
Lorden, John William
Remnant, Sir James


Denniss, Edmund R. B. (Oldham)
M'Donald, Dr. Bouverie F. P.
Robinson, Sir T. (Lancs., Stretford)


Edwards, John H. (Glam., Neath)
McLaren, Robert (Lanark, Northern)
Scott, A. M. (Glasgow, Bridgeton)


Foxcroft, Captain Charles Talbot
McNeill, Ronald (Kent, Canterbury)
Scott, Leslie (Liverpool Exchange)


Galbraith, Samuel
Marriott, John Arthur Ransome
Shaw, William T. (Forfar)


Gould, James C.
Moore, Major-General Sir Newton J.
Smithers, Sir Alfred W.


Hall, Lieut.-Col. Sir F. (Dulwich)
Morden, Colonel H. Grant
Thomas, Brig.-Gen. Sir O. (Anglesey)


Henderson, Major V. L. (Tradeston)
Nall, Major Joseph
Wedgewood, Colonel J. C.


Herbert, Hon. A. (Somerset, Yeovil)
Newman, Sir R. H. S. D. L. (Exter)
White, Charles F. (Derby, Western)


Herbert, Dennis (Hertford, Watford)
Newton, Major Harry Kottingham
Wood, Major M. M. (Aberdeen, C.)


Hills, Major John Waller
Norris, Colonel Sir Henry G.



Hinds, John
Palmer, Charles Frederick (Wrekin)
TELLERS FOR THE NOES.—




Sir A. Fell and Mr. Bigland.

Mr. G. BALFOUR: I beg to move, in Sub-section (1, b) to leave out the word "actually" ["any interest or dividends actually paid"].
It will suit the convenience of the Committee, perhaps, if I am allowed to take this Amendment and the next Amendment standing in my name and the name of the hon. Member for North East Derbyshire (Mr. Holmes) together. The hon. Member for North East Derbyshire is satisfied with that course, if it is agreeable to the
Committee. The object I have in moving this Amendment is to protect the interests of the struggling company. The peculiar feature of the second Amendment is that if you leave the Clause as it stands, you protect the interests of the prosperous company and leave the struggling company in a bad position. The first Amendment I may dismiss in a word. I think the word "actually" is redundant in any event in the Clause as it stands, and in the event of the second Amendment being inserted, I think it is quite unnecessary.

Sir D. MACLEAN: The second Amendment is consequential on the first. Amendment, and I would suggest that the hon. Member first explain what the Amendment means.

The DEPUTY-CHAIRMAN (Sir Edwin Cornwall): I thought that was what the hon. Member was intending to do. I understand there is no meaning in the Amendment which he is now moving unless the Amendment which follows be proposed, after this Amendment has been dealt with, and is therefore consequential upon the Amendment which follows.

Sir D. MACLEAN: Consequential on the second Amendment?

The DEPUTY-CHAIRMAN: Yes.

Sir D. MACLEAN: This is a new experience in this House. I have never seen it done yet.

Mr. BALFOUR: The first Amendment is to omit the word "actually." I suggest that that word is not required, because if the dividend be paid, it is actually paid. The second Amendment—

The DEPUTY-CHAIRMAN: The hon. Member should not develop his argument on the second Amendment. He is quite right to mention its relation to the first Amendment.

The FINANCIAL SECRETARY to the TREASURY (Mr. Baldwin): I think it would be for the convenience of the Committee if the hon. Member would withdraw this Amendment, and take the discussion on the Amendment of the hon. Member for North East Derbyshire (Mr. Holmes).

Colonel GRETTON: Apparently this word "actually" is standing in the way of the second Amendment, and my hon. Friend must get this word out of the way, in order that the second Amendment may become effective. If that be the case, would not the discussion be more conveniently taken on the first Amendment?

Mr. G. BALFOUR: It appeared to me that the word "actually" was rebundant, and in any event particularly unnecessary in view of my second Amendment. I am quite prepared to adopt the course suggested by the Financial Secretary.

Amendment, by leave, withdrawn.

Mr. HOLMES: I beg to move, in Subsection (1, b), after the word "paid"
["dividends actually paid out of those profits"], to insert the words, "or payable in respect of that accounting period."
The Clause as it stands says:
(b) The amount of tax payable in respect of the profits of the British company for any accounting period shall in no case exceed the amount represented by 10 per cent. of the balance of the profits of that period, in accordance with the provisions of this part of the Act, after deducting from the amount of those profits any interest or dividends actually paid out of those profits … on any debentures, debenture stock, preference shares…
What I want to make clear is this: many companies do not actually pay during the accounting period their debenture interest or preference dividend. They may close the year on 30th June. They may pay their debenture interest and their preference interest on 1st July. This is not actually paid during the accounting period. It, however, is payable in respect of the accounting period. I merely want the companies to have the right to charge against each accounting period the full debenture interest payable in respect of that period, and also the fixed preference dividend. Beyond that I do not want to go.

Mr. BALDWIN: This is a somewhat difficult matter. We quite admit that whatever words are ultimately chosen there will be adequate grounds for criticism of those words. What we want to do is to secure that the concession that is given to the companies shall be given to them at the time when it is to their greatest benefit to receive it. We consider that by taking interest on the dividend actually paid out of the profits of the accounting period we attain that end. The hon. Member who moved this Amendment was good enough to explain to me in private what was the object that he wished to attain. I can assure him that our intention was that the charge should fall exactly as he wishes it should fall, and we are advised that the words we are employing do attain that object. I hope he will be content and take that from me. It is a very technical matter. I have the assurance of our draftsmen that what I have stated is the case; but I am quite willing to look again at these words between now and Report, and if there is any doubt that they do not give the effect he wants, I am quite willing to meet him. It is
our intention that they should. With this brief explanation I hope, under the circumstances, he will be willing to withdraw his Amendment.

Mr. HOLMES: So far as the particular point goes, I am quite satisfied with what the Financial Secretary has said. As his observations will appear in the OFFICIAL REPORT, and will be read through the country, it will satisfy those concerned that the point has been raised. But it appears from what the right hon. Gentleman has just said that this Clause goes beyond what one anticipated, namely, that though the arrears of preference dividend were paid in any given accounting period—perhaps three or four years preference dividend was paid off—the whole of that amount, since it was actually paid in the accounting period, would be allowed to be deducted.

Sir J. BUTCHER: This may become a serious point of substance if the Bill goes through, and I hope my right hon. Friend will really consider whether the point is really met. My right hon. Friend has pointed out that the intention of the Government is that only the interest on debentures or the dividends on preference stock, if not actually paid during the accounting period, yet has become payable during the accounting period, shall be deducted. That is the point. We do not want to leave it to the uncertain decision of a court as to how this Clause shall be interpreted. I urge my right hon. Friend between now and the Report stage to look into the matter a little further so as to make the position clear.

Mr. G. BALFOUR: There is another aspect of this point which has not been touched upon, but which is most important. I suggest that if we leave the words, "paid out of those profits," and do not put in "paid or payable"—do not amend the Clause—you are seriously affecting the interests of these trading companies which ought to receive the necessary protection. To make the matter clear, let me give three illustrations which have come under my notice lately, though I do not pretend to be personally interested in the destiny of these companies. Lord Farrer is chairman of a company with 16¼ millions of debentures and preference share capital. That is excluding ordinary capital. That 16¼
millions of capital would be available for the purposes of deduction. Up to June, 1914, that company was able out of its earnings to pay the whole of its prior charges on the whole of that 16¼ millions. Entirely due to the War it had to stop payment on the whole of these charges, except the first 4 millions of First Debentures. On 12¼ millions it had to default in its interest. That interest on dividend would be payable for the purposes of the deduction of 10 per cent. That went on for some time, and the preference shareholders and debenture holders of the company agreed to accept 3½ years' deferred warrants for the amount of interest and dividends which ought to have been paid to them. The aggregate amount of that interest and dividends was nearly £1,000,000 in the three and a half year, or £979,000. Those warrants were payable in June, 1919, and in that year the company could not pay them, and they weighed in the warrants and accepted in exchange further debentures. They also made a further sacrifice. They said, "We will accept 3 per cent. interest only on this round figure of £1,000,000 of debentures on condition that the preference shareholders will waive the whole of their preference dividend while these low-yielding debentures are outstanding." What is the position of that company under this proposal? It has not paid its preference dividends, and it cannot deduct them until these debentures are out of the way. If the Parliamentary Secretary can show me where that point is covered, then I do not wish to waste further time. I can see no words which will protect you where you fail to pay your preference dividend or the debenture interest, because you cannot deduct it from your 10 per cent. total.
Take a second instance. This is the case of an English company owning an agricultural property in Greece. That company, with £650,000 share capital and £425,000 debenture capital, had all kinds of troubles to face; it has defaulted on its debenture interest and has given up part of its debentures. It is not allowed to deduct the interest because no payment is actually made, and it has an accrued charge, and you are going to tax that part although it is earned. An urgent call for money necessitated putting the money back for this general purpose to save the company from further difficulties.
My third case is that of a company owning a light car traction business in the Argentine. That company at the outbreak of War had just finished the first portion of its construction work. The War came on and the earnings of the company had all to be put back into the company in order to go on with the construction work. There were big arrears of preference dividend. It is in the position of not being able to find cash for development. It is not paying preference dividend, but it is accruing against the company, and because it is not paying this dividend, it is not allowed to deduct it from the 10 per cent. net earnings. I suggest that this means simply a direct tax on war losses. Without the words "paid or payable" the Chancellor of the Exchequer is not giving effect to the very idea which he has expressed, and the intention which can be read into this Clause. Under these circumstances I ask my hon. Friend to press this Amendment and, if necessary, to divide upon it.

9.0 P.M.

Mr. BALDWIN: The speech of my hon. Friend only shows once more what I said in the few remarks when I rose before, that this is an exceedingly difficult and complicated subject, and every method which has been suggested for securing relief is easily open to criticism. Let me point out what is the effect of the words of the Clause as at present drafted. The relief for the accounting period is given when the profits are actually used for the benefit of the fixed charge, and no relief is given when the profits are not actually distributed in the payment of the fixed charge. If my hon. Friend will work out a number of fairly simple examples, and not such difficult ones as he has instanced to the Committee, I think he will find that under the Clause as drafted, the relief comes when it is most seriously required, and on the whole I think what we propose is the fairest method.

Mr. G. BALFOUR: Can the right hon. Gentleman give me a few illustrations to show that is the case? I could give him scores of struggling companies as examples.

Mr. BALDWIN: I do not think we should have any difficulty in giving any number of cases, but I think it would be
wasting the time of the Committee. The issue between us is really very simple. It seems to us that the natural time when the relief is required is the time when the large payment is made, and that is the time when you want relief. Should my hon. Friend wish to carry this matter to a Division now, of course he is at liberty to do so; but if, on the other hand, he is not satisfied, and cares to raise the question again when we come to the Report stage, we shall be perfectly prepared to look into any words which may be suggested.

Mr. HOLMES: The last remark of the Financial Secretary seems an entire contradiction of what he said before. I explained that I moved this Amendment for the purpose of allowing a company to charge up against the accounting period the interest on its debentures which it did not actually pay in the accounting period, but perhaps paid one day after the accounting period ended. Does the right hon. Gentleman say that that point is covered?

Mr. BALDWIN: Yes.

Mr. HOLMES: For how long afterwards? Suppose it was paid three months or three years afterwards, would it then be exempt? The right hon. Gentleman, in his second speech, seemed to say, "We are going to disregard altogether the period covered by the debenture interest or the preference dividend, and we are only going to take the actual payments made." I think the Chancellor of the Exchequer and the Financial Secretary are entirely wrong in allowing the company to charge against the accounting period the particular interest they have paid in that accounting period. They ought to allow them to charge up, if it is a six months period, six months debenture interest or six months preference interest. If the intention is different, if the intention is to allow the company to charge up the amount they have actually paid they are entirely wrong, and I am prepared to divide the Committee against it.

Colonel GRETTON: Do the Government and its advisers realise where this Clause carries them? I agree with the hon. Member for North-East Derbyshire (Mr. Holmes) that it is right that the money payable and due in any accounting period should be set down as a deduction,
and that the day when the payment is made has really nothing to do with the obligation. But the other point which has been raised is altogether different. Where a company has defaulted, from whatever cause, and is practically in an insolvent position, the circumstances are quite different. There are cases where companies are temporarily in difficulties. My right hon. Friend the Financial Secretary proposes to tax companies temporarily defaulting, and to impose upon them this tax, with all its rigours, simply because they have not paid out the dividends, and when it gets into a more solvent condition he is going to make the deduction. That is an actual contradiction in terms. Certainly, whatever allowance is made for a company which is able to meet its obligations should also be made for a company which is temporarily embarrassed and unable to meet its obligations. The tax should not be imposed with all its rigours on the defaulting company, while the company in a more prosperous condition gets exemption. If the right hon. Gentleman will give an undertaking to consider the bearing of the Clause on the cases cited by my hon. Friend behind me (Mr. G. Balfour), and will endeavour to meet those particular cases, I hope my hon. Friend will not press the Amendment to a Division.

Mr. BALDWIN: I am quite willing to give that undertaking. I see the difficulty which has been raised. After all, there is a very broad distinction between dividends that are made in the accounting period and passed for payment, even though the actual clay of payment may not be fixed. There is a great difference between a position like that and the other type of case where the dividend is entirely passed for the time being, and the company has no idea as to at what date it will be able to pay out the interest or dividend in arrear. I shall be very pleased to give consideration to the whole question before the Report stage.

Mr. G. BALFOUR: I am glad the right hon. Gentleman has agreed to look into the matter before the Report stage with a desire to try and meet our point. I could give him more illustrations of the kind I have submitted.

Mr. HOLMES: I ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Mr. MARRIOTT: I beg to move, in Sub-section (1, b), after the word "stock" ["debenture stock"], to insert the words "rentals, annuities, or other fixed charges, and." This is merely a drafting Amendment, and I hope the Government will be disposed to accept it. The words will make the Clause much more clear.

Sir F. BANBURY: There is one question which I think might possibly be asked here. I want to know what is the position in the event of there being no profits on ordinary stock. We were told that this is a charge on profits. If the profits are only sufficient to pay a dividend on the debentures and on the preference shares and there is nothing for the ordinary shares, there surely will be nothing out of which the tax can be paid, because there will really be no profit. What is going to happen in that case? Is anything going to happen, or will the amount which is to be charged and which cannot be paid because there are no profits be held over until the time when there will be profits, or will it be wiped out altogether? My own opinion is that this is a tax on the profits on ordinary shares, and if there are no profits, the tax will be wiped out. I submitted this point to a very clever lawyer, who told me that he really did not know, but he thought my solution was probably the right one. I thought this was a good opportunity, as the question of debentures is raised by the Amendment of my hon. Friend, to put this question to the right hon. Gentleman.

Mr. BALDWIN: It certainly does not add to the amenities of Debate if one is apt to have a conundrum, which has cost its intelligent author a good deal of exertion to compose, thrown at one's head without any notice. I should imagine that this is a case which is provided for under the Amendment which we discussed at some length and divided upon about dinner-time. The Corporation Tax is charged at 1s. in the £ on the total profits, and some of the profits, of course, may have been used, as in my right hon. Friend's illustration, for paying preference dividends and, possibly, interest on mortgages, if they come within the terms of the Act. In his illustration all the profit is eaten up
by these prior charges, and there the concession comes in, the amount of the tax being limited to 2s. in the £ on the amount available for ordinary dividends.

Sir F. BANBURY: If there be no amount available, what will happen?

Mr. BALDWIN: If there be no amount available, of course, there will be nothing charged. With reference to the Amendment moved by my hon. Friend the Member for Oxford, I would ask him most respectfully if he would postpone bringing it forward until the Report stage. I have not seen it, and we have not had it to consider, but it is obviously an Amendment of some interest, involving some technical points. I should be very grateful to him if he would give us an opportunity of considering it, as neither I nor any of my advisers have had an opportunity of attempting to construe it in relation to the context of the Bill.

Mr. MARRIOTT: In reference to the right hon. Gentleman's appeal, I am prepared to withdraw the Amendment and move it again on Report.

Amendment, by leave, withdrawn.

Mr. HOLMES: I beg to move, in Subsection (1, b), to leave out the words
(being shares which do not confer on the holders thereof any right to participate in profits beyond the right to receive dividends at the fixed rate)
and to insert thereof the words "so far as the dividend paid thereon is at a fixed rate."
The Chancellor of the Exchequer has already intimated that he will accept this Amendment, and therefore I need not say more than that the words I desire to leave out do not take into account a new type of preference shares which have come very much into vogue lately, called participating preference shares. They bear a fixed dividend, and a further amount is payable to the preference shareholders after the ordinary shareholders have received say 10 per cent. The words in the Bill do not meet the case of these shares, but it is met by the words which I have put down, and which the Chancellor of the Exchequer has already signified his willingness to accept.

Amendment agreed to.

Mr. HOLMES: I beg to move, in Subsection (1, b), to leave out the words "issued before the twentieth day of April, nineteen hundred and twenty."
In arriving at the amount of profits under this Sub-section, it is permitted to deduct the interest on a permanent loan issued before the 20th April, 1920, but can see no object in that limitation. Let us take the case of a company which is raising debentures at the present time, for the purpose of its business, in order to increase its trade and increase its profits. The Bill says that the interest on those debentures must not be deducted from the profits. Apparently the Chancellor of the Exchequer sees some method, which I cannot imagine, by which companies may be able to "fake up" permanent loans after the date of the introduction of the Finance Bill. Possibly the Financial Secretary will explain to us. what that method may be. I can see no reason why a company raising permanent loans for the purpose of its business should not be allowed to deduct the interest on them.

General Sir IVOR PHILIPPS: I desire to support this Amendment, for I cannot see any reason why these words should be included in the Bill. I do not suppose that a permanent loan means a perpetual loan. I am not a lawyer, but I understand that it might be a loan for a fixed period, and, on the expiration of that fixed period, according to some agreement, a new financial arrangement might have to be made and a new loan raised. There seems to be no reason why new money brought in in place of the previous permanent loan, which, under some agreement, has been paid off, should not have the same benefit as the money already raised under the previous loan.

Sir F. BANBURY: As I understand this Bill, one of its objects was a good object, namely, to prevent people from turning themselves into private companies and so evading the Super-tax. Let us suppose that the hon. and gallant Gentleman opposite (Sir Ivor Philipps) turns himself into a private company, and that he puts into it his investments, which, let us say for the sake of argument, amount to £100,000. That returns him an interest of £5,000. Being a prudent and economical man, he only spends £1,000 a year, and therefore he
puts £4,000 to reserve and does not pay Super-tax on it. If this Bill becomes law, he will be obliged, if not to pay Super-tax, to pay this particular tax. What he now wants is to be able to say, "I will turn £90,000 of that £100,000 into debentures or into a permanent loan, with the result that I avoid the tax altogether." That is the effect of it. I happen to have had some knowledge of this from my experience on the Treasury Issues Committee, and I think there was a leakage which ought to have been stopped. That arose from imposing these enormous taxes upon people who, as I think the right hon. Gentleman the Member for Paisley said yesterday, had the right to evade the law if they could. The result of that evasion has been an endeavour on the part of the Government to stop it by bringing in this Bill, which inflicts a great deal of hardship on a great many innocent people. If the Bill is to have any effect, this particular Clause must remain in it, although I do not know what is going to happen to an ordinary company which wants to borrow money on debentures. You are attempting to do something to put right an injustice or an evasion of some tax, and in so doing you cause more harm than by letting it alone. That, as far as I understand it, would be the effect.

Mr. GREENWOOD: I should like to ask the meaning of the word "otherwise" in the Clause where this permanent loan is explained. It says:
The expression 'permanent loan' means a loan of a permanent character which is secured by mortgage or debentures or otherwise.

The DEPUTY-CHAIRMAN: rose to put the Question—

Mr. G. BALFOUR: I understood that we might expect a reply from the right hon Gentleman before the Question was put. Like the hon. Member for North-East Derby (Mr. Holmes), I am quite at a loss to understand why these words "issued before 20th day of April, 1920," should remain in, and I think we might have some explanation.

Mr. BALDWIN: I was going to rise, but I thought the hon. Gentleman wished to speak.

Mr. BALFOUR: I only rose when the Question was being put—

Mr. BALDWIN: I never refused to reply.

Mr. BALFOUR: No, I do not say that. I do not think the right hon. Gentleman wished to avoid a reply, but the Question was being put to the Committee, and I only interrupted in order to give him an opportunity to reply.

Mr. BALDWIN: The reason for these words being inserted is this: In future, people who form companies will know exactly what liability they have upon them, and they will be able to consider this liability in deciding on the form and the amount of the capital which they employ in their companies. Companies that were in existence before this tax came into being, of course, have not had that advantage. I admit what the Member for North-East Derbyshire (Mr. Holmes) has said as to its being difficult always to foresee any and every method of evasion of a new tax, and it is possible that a line of evasion, which seems possible to those who are responsible for collecting the taxes, may not be the line that is practised. We have a fear that it may be sought to evade or to minimise the effect of this tax by floating a company in which by far the greater part of the share capital takes the form of prior charges, leaving so small an amount of ordinary stock that the company may get the benefit of the concession to which I have recently alluded, and which was debated this afternoon. It is for that reason that these words have been put in. I quite realise that, as we are now in July and the final form of this Bill is not yet settled, it may be that the date inserted is earlier than is reasonable, and I am quite willing to reconsider that date, but I cannot accept the Amendment put forward.

Sir CLIFFORD CORY: I think with the Secretary to the Treasury that cases may occur in which an excessive amount of debentures or preference shares are created, but surely that difficulty can be overcome by fixing proportions, saying that not more than a certain proportion of the capital shall be debentures or preference shares. It is not an uncommon thing to divide the capital into thirds, making one-third debentures, one-third preference, and one-third ordinary. Why should not my right hon. Friend put in a limit and say that if they have not exceeded this limit they shall get the concession.

Sir J. BUTCHER: I should like to ask what my right hon. Friend really means by the words "issued before the 5th of April, 1920.' Are those words meant to govern not merely the words "permanent loan," but the words, occurring three or four lines higher up, "Debentures, debenture stock and preference shares"? If that is so, it is a very important point, and I am rather disposed to agree that to prevent evasion of this tax you should make the words refer not merely to issues of loans, but to the debentures, debenture stock and preference shares. Perhaps, as the Chancellor of the Exchequer has come in, he will tell us whether that is the meaning. If it does refer to the words above, I suggest that it should be made more clear, for otherwise there will be great difficulty hereafter in the law courts in saying whether the word "issued" applies only to a loan or to the other stocks. I do not suppose any of us want evasions of this Bill, and therefore might it not be necessary to insert words to prevent a company from so re-arranging its capital as to turn practically the whole of the capital into debentures and preference shares, leaving no ordinary shares at all. If a company were at liberty to do that, then the amount received under this Act by way of profits would be entirely wiped out. The point immediately before us is as to what antecedent words the word "issue" refers to.

Mr. BALDWIN: It governs all the words—debentures, debenture stock, and so forth.

Sir W. HOWELL DAVIES: It seems to me that if such a policy were adopted as turning the whole of the capital in a business into debenture stock, as the Secretary of the Treasury suggested was possible, the particular firm doing it would get no credit at all, and therefore such a proceeding may be reckoned impossible. I think the question raised in this Amendment is a substantial one and ought to have the consideration of the Treasury, and if a decision cannot be arrived at now it ought to be thought out before the question comes up on the Report stage.

Sir I. PHILIPPS: I certainly had no idea in my mind, until the point was raised by the right hon. Baronet the Member for the City of London (Sir Frederick Banbury), that old-established companies who have at present a deben-
ture issue which is, under the terms of it, to be paid off, and arranged a fresh debenture issue, will not get the benefit of the terms in this Act, and so will be placed in a worse position than another company which has its debenture issue running for another five or ten years. But the discussion has raised a much more interesting subject, and that is, that no further preference shares can be issued. It is an entirely new idea. Not being a lawyer, I certainly did not understand that "before the 20th of April" referred to future issues of preference shares. There may be some old-established companies that have half a million preference shares, of which 300,000 have been issued, proposing in the ordinary course to issue the further 200,000. The first 300,000 would get the benefit, but there would he no benefit for the further 200,000. I have no wish to support anybody who desires to evade the law, but I do think that is putting different companies under different conditions, and, although I support the Chancellor of the Exchequer in any condition which he puts upon all companies, I think it is most essential that we should not perpetuate the inequalities and the unfair taxation that we have already carried in this House in the way of Excess Profits Duty.
It appears now, according to the right hon. Gentleman, the Financial Secretary to the Treasury, that the words will apply to all; to preference shares and debenture stock. That opens up a rather alarming prospect, especially for new concerns, though it will not be so bad for old-established concerns. We are all in agreement with the Chancellor of the Exchequer in his main object, which is that there should be equitable taxation and that everyone will bear his proper share of the burden. But these new concerns which are developing and want to develop in the future are likely to be penalised. It is the same old story which we have had in the case of the Excess Profits Duty. It will give an advantage to those old-established businesses. I cannot help thinking that many of the Chancellor of the Exchequer's advisers are among the bankers and the members of the big financial houses who do not suffer in any way by paying a penny to the Excess Profits Duty, and I think will not suffer under this tax. The greater burden will fall upon the young, on the venturesome youth who desire to make a new business and to carry
out the great commercial undertakings of the future. At any rate, they are making an attempt to start them. It seems to be entirely against the young man, the young business, and the progressive business. I hope the Chancellor of the Exchequer will not thus tamper with the trade of the country, and will not in this way penalise young businesses while leaving in a better position than they will be the greybeards of finance. I hope he will leave these young firms alone.

Mr. CHAMBERLAIN: I have been away for a few minutes upon other business, but I have been informed of what has passed by my right hon. Friend who sits on this Bench. The hon. and gallant Gentleman who has just spoken would not find it so easy to speak if he were in the same position as we are on this Bench. He is not under the restrictions as we are. I am glad to find that among us there is a large measure of agreement upon the main points. Perfection is something which we strive to obtain even in taxation, though we do not often succeed. It is extremely difficult to bring into our complicated and traditional system which is the growth of centuries, some new taxation and to adjust it so that it is absolutely fair to everyone. In this case, however, we have two great objects, one of which is to prevent the tax being frustrated and rendered nugatory or void by a large number of people so that it would become oppressive upon those upon whom it does fall. There has been some criticism with regard to inequalities, but my object is certainly not to put old businesses in a preferential position over new ones. I am as anxious as anybody to encourage new business and new enterprise, but I am bound by the limitations which are imposed upon anyone who proposes a new tax. You must take care that your new tax is not rendered void by people carrying out something which might have been done for other reasons previously, but which would now simply have the effect of evading the tax. I think the matter is one well worthy of further consideration, and if the hon. Gentlemen who are interested will allow me the opportunity, I will take time to consider what has been said in my absence more fully than I have been able to do up to this moment. I shall also be glad if they will give me any suggestions which they
may think will satisfy our two objects, the first of which is to see that the tax is not evaded, and the other, that as far as possible it shall be equitable. I will consider the matter with an open mind and see if I can do anything before the Report stage to meet the points which were raised. That is as far as I can go now.

Sir F. BANBURY: This is really a very important matter. The hon. and gallant Gentleman on the Front Opposition Bench has said that it would be more favourable to banks than to other businesses. But the Banks have no debentures. This tax will fall upon them in a larger proportion.

Sir I. PHILIPPS: I was referring to the Excess Profits Duty.

Sir F. BANBURY: I thought he was referring to this tax. I should like to see the Chancellor of the Exchequer give the matter his consideration, but I do not think he will find that it is going to be against new businesses. It is much more likely to hit the old businesses. An hon. Gentleman has just given an instance of what would happen. He said that suppose a firm was authorised to issue £500,000 in preference shares, of which £300,000 had been issued. He asked, "What about issuing the balance?" I think the balance would be liable to this tax and the other £300,000 would not be. Suppose it was decided to issue them. Consider the confusion that will arise. Here is an issue of £500,000, safe in every way as to security, as to rate of interest, and as to priority of capital. In the ordinary way it can be dealt with as one security. Under this Bill, £300,000 of it will be subject to tax and £200,000 of it will not be. How are you going to distinguish? On every transfer, will you have to enact that a number shall be put, and that number shall correspond with the number of the certificate which was issued when the 200,000 shares were issued? I do not say it is impossible, but look at the trouble it is going to put upon ordinary people, and look at the effect it is going to have upon investments.

Sir I. PHILIPPS: That is how it is under the Bill.

Sir F. BANBURY: Exactly. I am supporting the hon. and gallant Gentleman. When the Chancellor of the Ex-
chequer was out of the Committee, I gave the real reason for these words, and with all due humility and respect to the Financial Secretary, I think I put the case clearer than he did. There is no doubt, however we choose to camouflage it, that was the meaning, and it was a good meaning, and it ought to be done, but the result of doing it is that you cure one evil and bring in a great many more which are not cured. I suppose we want to encourage capital to invest itself in industrial undertakings. What is going to happen? The public will not bother themselves to find out whether or not the particular issue which they think of subscribing to is or is not subject to a particular tax. No doubt a lawyer can tell, on looking at the documents, whether an issue is subject be the tax, but I do not know that anyone else can. You will have to say in the prospectus, "It is understood that a person subscribing to this issue will be in a different position from other shareholders in the same issue." [Interruption.] I am sure I am right. That shows the difficulty of bringing forward a new tax of this sort and attempting to pass it hurriedly through the House We cannot do these things in a hurry. Leaving out any question whether the tax is right or wrong, we are going to do something which is going to influence to a very great extent, for good or for evil, the business of the country and the probability of raising capital for the business of the country. We really must consider that in some detail. I trust, if we do not pursue the subject any further, it will be understood that on the Report stage some attempt will be made to get over the difficulty. I do not see how you can. My right hon. Friend has asked for suggestions. I will make one. The only way I can see to get over the difficulty, or rather to minimise it, is to say that a company, new or old, may have a certain percentage in debentures, a certain percentage in preference, and the remaining percentage in ordinary, and if that percentage has not been entirely issued before the passing of the Bill, it may be made up. I do not say that will meet it altogether, but it will go some way to meet it, and it will put all companies in more or less the same position.

Mr. CHAMBERLAIN: Yesterday many speakers repeated the charge against the Government that they were not sufficiently ready to propose an alternative to a tax which is generally disliked. Perhaps our discussion to-day will give the Committee some idea why the Government does not rashly forego an existing tax and propose an alternative. It is not so simple.

Sir F. BANBURY: I was not attacking you.

Mr. CHAMBERLAIN: That is not in reply to my right hon. Friend. It is an observation occasioned by the contrast in the Debates we have had on two successive days. Yesterday we were told, "It is your business to produce an alternative. Lay it before us, and we will, of course, accept it." To-day we have a new tax, and we see some difficulty in framing it and adjusting it to circumstances. I am quite ready to consider—I cannot say more than that—the suggestion with which my right hon. Friend concluded. I should like very much, while I am considering it, to know whether it would be generally accepted. It helps some people, it injures others. I do not say that as an invitation to a prolongation of the Debate.

Sir I. PHILIPPS: To what proposal is the right hon. Gentleman referring?

Mr. CHAMBERLAIN: The proposal with which my right hon. Friend concluded his speech.

HON. MEMBERS: What was it?

Mr. CHAMBERLAIN: Perhaps hon. Members will look at the report of the speech, and if they have views on the subject will communicate them to me. While my right hon. Friend's proposal is well worthy of discussion, he is wrong in the arguments with which he led up to it. The tax is upon the company, and not upon a particular part of an issue made by the company, and there is no reason for any distinction between that part of the debenture issue which gains and that part which does not. If my right hon. Friend will consider what has been said, and will look again at the Bill, he will see that his fear as to these complications on the Stock Exchange, this necessity for noting the scrip with a
reference as to whether it was issued before or after a certain date is really a chimera of his own imagination. That is not the point; but that there is a point which really requiries consideration I readily conceive, and I will give my best consideration to it.

Amendment, by leave, withdrawn.

10.0 P.M.

Mr. G. BALFOUR: I beg to move, at the end of Sub-section (1, b) to add the words "and a sum equal to six per cent. per annum on the amount of the issued and paid-up ordinary share capital."
This was referred to on the Amendment moved by the hon. Member above the Gangway, and I think it is necessary to review the facts of paragraph. (b) in order to grasp the fulll meaning of the Amendment. Under paragraph (b) company may, as an alternative to the five per cent. Corporation Tax, pay a lesser sum, that being a sum calculated on 10 per cent. of the profits of the company after deducting from those profits, first, any debenture interest and interest on permanent loans, and secondly, any preference dividends paid at a fixed rate on preference shares. If the abatement from the 10 per cent. stops at that point, you are hurting the unsuccessful company and favouring the successful company. The benefit of the deduction rests entirely on the extent of the capital arrangement. Let me illustrate the point. If you take two companies, each with £1,000,000 total capital, one company happening to have £500,000 of 8 per cent. preference shares and £500,000 in ordinary shares, and the other having a straight £1,000,000 of ordinary shares, in the one case you get, as a deduction from the 10 per cent., 8 per cent. of the £500,000 preference shares, whereas in the other case the whole of the charge falls on the ordinary shareholders and on the million of issued ordinary shares. The Chancellor of the Exchequer says that the whole of this tax falls upon the business or corporation, and does not in any way affect the shareholders. He pointed out that there would be no difficulty, because certain debentures and certain preference shares were to be exempted as to the amount of interest if issued before April last, and as to others, he said that it did not matter a bit as the whole charge came upon the business, and there could be no preference in connection with an
old business. I suggest that there would, and that the difference is equal to a preference given to the old-established business. If he will look into the matter he will find that it is so, and that it is a distinct preference given to that corporation or trader. If you have a company with £500,000 of issued capital to-day compared with a company of £500,000 issued before 29th April, you have the further point that the capital issued before April last is given a preference to the extent of the interest on the preference shares of the company issued before April last.
Let me show another inequality. Three companies can be instanced. Two companies last year raised the rate of their preference dividend by 2 per cent., from 6 per cent. to 8 per cent., simply because it was not possible to raise preference money at a lower rate. In both these cases the increase in rate was entirely an accidental event and had no reference to this Bill, because this Bill was not then known. These two companies will obtain the benefit of an abatement of 8 per cent. on their preference shares instead of 6 per cent. Take the case of another company with £350,000 of preference shares outstanding. They could not issue any more preference shares, and being short of cash they got the preference shareholders to agree to convert their preference shares into ordinary shares. That was only done a few months ago. It was due to the pure accident of that capital re-arrangement that in computing the amount of Corporation Tax they have to pay the preference dividend on £350,000 worth of 6 per cent. preference shares. That is entirely inequitable. The accident of converting the share capital in the one case to ordinary shares denies them the right of deduction in computing the Corporation Tax.
There is a much more serious consideration than those to which I have referred, and that is the consideration which was mentioned by the hon. Member for Yarmouth (Sir A. Fell), namely, the driving of capital out of the country. The Chancellor of the Exchequer referred to that point and indicated that he did not look upon it as a very serious matter. There has been a steady tendency for some time past, owing to the burdens occasioned by increasing taxation of every kind, to drive the Colonial public utility companies and
a great many other companies out of England. I can mention companies who have actually left this country on account of the increasing taxation. They have been heavily hit by the various taxes prior to this tax. The Excess Profits Tax, in certain cases, drove them almost to despair, and this tax, I am sure, will drive a great many other companies to follow their example and leave the country. There is one company with a capital of £200,000 which has left London. It has changed its location and is no longer recognised as an English company. There is a Bombay company with a capital of £2,149,499 which has left the country, a Rangoon company with a capital of £685,063, and a Hong Kong company with a capital of £251,875. All these companies have left this country. It is generally agreed that a large number of other Colonial companies have under consideration the transfer of their head offices from London to places abroad.
How much will this tax yield altogether? A small amount of capital, relatively, transferred from London to abroad will more than swamp the total amount which you will get from the Corporation Tax. You will lose all the other taxes—Income Tax, Super-tax, and, so long as it lasts, the Excess Profits Duty. I do not think this tax can be supported as it stands, and I suggest that if the Chancellor of the Exchequer can see his way to give an abatement of a sum equal to 6 per cent. on the ordinary share's of the company, he would get over this difficulty—at any rate so far as the Corporation Tax is concerned. Is it not right that people putting their money into trade and industry should at least expect that that trade and industry should yield a reasonable return, coupled with their hard work? Is it not right, reasonable, and essential that they should at least be secured of revenue equal to the amount that a lazy individual can get by putting his money into British secured Government Bonds at 6 or 7 per cent.? Surely we are entitled to demand of the Chancellor of the Exchequer an absolute and definite exemption up to such an amount as a man who is living entirely on what is called unearned income can get, and that at least the man who is putting his money into industry and working hard is entitled to demand, before he comes under the Corporation Tax, exemption to an
amount equal to what the lazy individual can get; the man who sits beside the fire toasting his toes or taking scented baths and amusing himself. Speaking from a very wide experience in many industries in England, Scotland, and Wales I am certain that the amount that will be deductable, due to this exemption, will be trifling because, remember, the tax is computed on the basis of Schedule D and the actual amount taken would be very small; but this Amendment will release industry and give confidence that people who put money into trade and industry are entitled to 6 or 7 per cent. as a normal yield not subject to special taxation. I press the Chancellor of the Exchequer to think seriously over this Amendment, which will make very little difference in the yield and will go a long way to re-establish the confidence that is so much needed for those who are engaged in industry.

Mr. CHAMBERLAIN: This is really a continuation of the discussion which we began upon the Amendment of the hon. Member for the Consett Division of Durham (Mr. A. Williams) much earlier in the day. All I said then applies to the Amendment of my hon. Friend. My hon. Friend will hardly expect the Chancellor of the Exchequer to echo his depreciatory references to the investor in public funds, and his description of that gentleman as a person probably sitting in idleness at home or indulging in scented baths does not seem to have any connection with realities At any rate, the Chancellor of the Exchequer will not single out for special penal legislation or animadversion anybody who invests in public funds at a time when there are none too many and when it is of the first consequence to the nation that their number should be increased. My answer to the hon. Member is that he has in mind a totally different tax from that which we have been considering. The logical conclusion of this proposal is, as was seen by the hon. Member for Consett, not merely that you exempt profits below a certain per cent., but that you graduate the tax on profits above a certain per cent. in order to make good the loss of revenue. The hon. Member on the calculation formed I know not how—as a Member of Parliament or a private individual I should not venture to form a calculation on a matter of this kind—said that the cost of his suggestion to the State would be a trifle. I am advised that it would not be
less than £10,000,000 or £12,000,000. That is not a figure which we look on as trifling. As long as we are discussing Excess Profits Duty, I am urged to take a flat tax on profits, but the moment we come to a flat tax on certain profits, I am urged to transform it into a tax on profits beyond a certain tax-free exemption and then logically by the hon. Member for Consett, graduated.

Mr. A. WILLIAMS: I did not use the word "graduated." I said I thought that the right hon. Gentleman had something of that sort in his mind.

Mr. CHAMBERLAIN: I may have misunderstood the right hon. Gentleman, though I do not think so. I thought he said that one argument with which I was confronted was that there would be a loss of revenue, to which I felt I could not expose myself. Therefore he suggested that that might be met by a higher rate of tax, where the profits were not merely at the exemption limit, but something above it.

Mr. WILLIAMS: I was not so precise as that.

Mr. CHAMBERLAIN: The hon. Member is never precise in constructive suggestion. In criticism he can be as precise as anybody else. Constructive suggestions are vague and always made in such a form that when translated into a project of legislation the real father can be transformed into a violent critic.

Mr. WILLIAMS: I made a definite suggestion for changing the exemption from one form to another. I did say that the right hon. Gentleman had certain things in his mind and, if so, my suggestion would fit in with his.

Mr. CHAMBERLAIN: I do not want to go into personal controversy with the hon. Gentleman, and will state the case without reference to what I thought he said. You may have a flat rate of tax on profits of certain concerns, but not a flat rate proposal over all, or you may have a scheme of taxation on profits in excess of a certain amount. It seems to me logical that the rate of tax should increase with the amount of the excess above your limit. There you are at once landed in two difficulties. I do not say that they are insuperable, but they are not to be handled, as the right hon. Gentleman the Member for the City of London has said, by a single scheme, but
by a very carefully conceived scheme. You have got to determine what is the real capital in a company on which you are going to allow exemption. When I attempt to do that I have hitherto found universal resistance on the part of those who assume to speak on behalf of industry and commerce, and you have got, in addition, to make that valuation of capital, and to provide that the capital of companies is not re-arranged, and that companies are not reconstructed with a view to the avoidance of the tax in which they would be liable if they remained in their present condition, and with a view to turning their capital into such a form as will render them exempt from tax or liabilities. I think that my hon. Friend recognises that that is a work of difficulty which it is quite impossible for me to undertake at this moment, and that it is not possible to graft on to a proposal for a flat tax a complicated proposal of that kind requiring machinery more elaborate than anything which we have at present.

Amendment negatived.

Mr BALFOUR: I beg to move, in Subsection (2, a), after the word "company," to insert the words "(not being a public utility company)."
If I understand the Chancellor of the Exchequer aright earlier in the evening, I gathered that he is to make a proposal to exclude public utility companies for a period of three years. If that is so, I have nothing more to say on this Amendment and would be very glad to accept the proposal of the right hon. Gentleman and to thank him for meeting us in a reasonable manner. It is not possible at this moment to commit the Government to a definite policy for all time regarding public utility companies. Three years will give us time to turn round and will give the Government opportunity to review matters, as to whether exemption can be continued or not.

Sir J. BUTCHER: I have an Amendment on the Paper which is, I think, designed to meet the same point as that aimed at by the hon. Member. It seeks to insert the words
but not including an undertaking when the rates, tolls, fares, dues, prices, or other charges are regulated by Act of Parliament or Order having the force of an Act.
I presume that is the sort of public utility company that the Mover of the
Amendment contemplates and that the Chancellor of the Exchequer proposes to exempt them for three years. If that is so, I can only thank my right hon. Friend for having met us.

Mr. G. BALFOUR: In answer to my hon. and learned Friend (Sir J. Butcher), I would mention that later on the Paper I have an Amendment to define a public utility company in words that may be appropriate. The definition is:
'A public utility company' means a company authorised by a special Act or an Order confirmed by, or having the effect of, a Statute with power to raise capital by the issue of stock, or the borrowing of money for the purpose of carrying on any gas, water, hydraulic power, or electricity undertaking.
I do not say that those words are perfect, but I think they convey a general idea of a public utility undertaking.

Mr. CHAMBERLAIN: I understand that the Amendment which has been moved was not to be moved. I am rather sorry it has been moved, because on Report I must bring my own Clause forward, and I cannot give a definition on the spur of the moment. In regard to the undertakings with which I intended to deal, my proposal is to suspend the operation of the tax in respect of them for three years, so that Parliament may settle how it is to deal with them, and can then review the question of taxing them in the light of the decision taken. The hon. Gentleman's definition is not wide enough to cover the undertakings to which I shall apply my Amendment. If, therefore, he will leave not merely the terms of the concession but the definition of the undertakings to be brought up by me on Report, he will have an opportunity of discussing the matter then. I hope I shall be able to satisfy him.

Mr. G. BALFOUR: I quite understood the Chancellor of the Exchequer. I had no intention of submitting my Amendment now, because I understood I was to withdraw it and also the definition. I wanted only to make a statement of my view, and I am quite prepared to accept the Clause that will subsequently be submitted by my right hon. Friend. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. HOOD: I beg to move, in Subsection (2, a), after the word "company," to insert the words "(except a company whose business is wholly carried on and directed abroad)."
The object of the Amendment is to exclude from liability to this tax companies which, although incorporated in the United Kingdom but carry on their businesses wholly abroad and are directed abroad. I have no doubt it is in the knowledge of the Committee that a very large number of companies have been incorporated here but carry on their business entirely abroad, one reason for their coming here being that the company laws of this country are looked upon as model laws and another reason being that the money or a portion of it has been found here to start those businesses. This country has benefited to this extent, that it has been paid the incorporation duties in respect of these companies, and it has perhaps benefited incidentally in other ways, but those companies do not pay Income Tax here, and therefore the reasons which I think the Chancellor of the Exchequer gave as to the evasion of the Excess Profits Duty by companies do not apply here. I would remind the Committee that these companies do not earn a penny profit here and therefore on that account do not pay Income Tax. I would ask the right hon. Gentleman whether it is wise now for the first time to impose this tax on companies which might just as well have incorporated themselves abroad instead of here. A good many of them have been incorporated here, and it seems to me that if this tax is to be imposed upon them there is no reason why they should not take themselves away, and in regard to companies which might have come here in the future, there seems no reason why, if this tax is imposed, they should not be incorporated where their business is actually carried on, instead of here.

Mr. TERRELL: I desire to support this Amendment, because it raises a question which I put to my right hon. Friend yesterday and which he never answered. As far as companies which are registered in this country and which carry on their business abroad are concerned, I obtained only recently an answer from the Treasury that they paid a total of £35,000,000 a year in Income Tax and Excess Profits Duty, and on
top of that it is proposed to add this Corporation Profits Tax. That is going to make a very heavy burden. I quoted yesterday a case of a company where the profits for this year were anticipated to be £1,000,000, out of which sum, net profits, something over two-thirds, was taken already by this country in the form of taxation. The company had foreign shareholders. The foreign shareholders were clamouring for a transfer of the registration to another country where taxation is lighter. If you oppress a company of this character, you will lose the whole of that revenue. That will be a very serious loss to us all who are taxpayers. It is a most serious question for every taxpayer in this country, and I therefore support the Amendment to exclude companies that are carrying on their businesses abroad from the operation of the Corporation Profits Tax. I do think it is a matter which requires far more consideration than the Committee has given it, because an item of £35,000,000 a year is a very important item indeed, and one which we cannot afford entirely to disregard.

Mr. CHAMBERLAIN: I hope my hon. Friend who moved this Amendment will not press it. Of course, it is true, as I said earlier to-day, that the heavier the weight of taxation the greater the inducement to go outside this country, provided the taxation is not rising in other countries at all comparably, and provided they can get in other countries equal advantages. I do not think they can. Taxation is rising in other countries, and the advantages in the City of London lead me to think that now, as hitherto—though I have heard the same apprehensions expressed ever since I was a Member of this House, or, at least, ever since I attended Budget Debates—those apprehensions are unfounded, and that the London home and management of the companies will outweigh the disadvantages.

Mr. HOOD: I definitely excluded the management. I said wholly directed abroad.

Mr. CHAMBERLAIN: Yes, "wholly carried on and directed abroad." The hon. Member who supported the Amendment did not make that distinction. Any concession of the kind that my hon. Friend suggests would not be logical to this particular scheme.

Mr. HOOD: May I point out that my Amendment is directed to companies that do not carry on business here, nor are directed from here, nor earn their profits here.

Mr. CHAMBERLAIN: I am afraid I have become a little confused between the hon. Member's Amendment and the arguments by which his Seconder supported that Amendment. I understood him to quote, or to be dealing with, a company registered in this country incorporated here under the laws of the United Kingdom, but carrying on its business abroad, and with its direction abroad. We impose a tax in respect of the privilege accorded to incorporation in this country, and the conditions which render a corporation liable are fulfilled in the case which the hon. Gentleman has just mentioned and by the supporter of the Amendment.

Mr. TERRELL: May I tell the Chancellor that I have handed in a manuscript Amendment, which is to the effect—possibly it will be convenient to deal with the two Amendments together—after the word "on" in paragraph (a) ["British Company carrying on any trade"], to insert the words "in the United Kingdom" That is a somewhat more vital Amendment than the Amendment which is now before the Committee.

Mr. CHAMBERLAIN: If I accepted this I should probably have the Mover of the Amendment disclaiming the addition and the hon. Member opposite (Mr. Terrell) would use it as a jumping-off place from which the more easily to drive me further out of the position which I have adopted, and further to reduce the scope of the tax and the limit of its yield I trust under all the circumstances the Mover of the Amendment will see his way not to press it.

Amendment negatived.

The CHAIRMAN: The next Amendment in the name of the hon. and gallant Gentleman (Major Hamilton)—dealing with charges, tolls, rates, etc., regulated by Act of Parliament—is covered by the decision which has been given by the Chancellor.

Mr. D. HERBERT: Can I not more that Amendment? I was asked to do so by my hon. Friend. It deals with quite an important point.

The CHAIRMAN: Yes, but I think the larger point covers the lesser one. I really could not go back in view of the decision which has just been given. The next Amendment is in the name of the hon. Member for Oldham (Mr. Bartley Denniss). I am not quite clear as to whether that is covered by the undertaking of the Chancellor of the Exchequer.

Mr. CHAMBERLAIN: No, Sir.

Sir C. CORY: I beg to move, at the end of Sub-section (2, b), to insert the words
Provided that this Part of this Act shall not apply to the profits of a company carrying on the trade or business of producing coal (coal mining) so long as the price at which coal may be sold or the standard of profits of the company is fixed by Act of Parliament or by an order having the effect of an Act.
I trust this will receive the sympathetic consideration of the right hon. Gentleman. The coal owners have given over the whole of the Excess Profits Tax in consideration of the guarantee of nine-tenths of their pre-War profits, retaining 10 per cent. for the losses of their more unfortunate neighbours. Therefore they are placed in a worse position than any other industry in the country, and to put upon them a Corporation Profits Tax as well would be something which they could not bear. Not only are they deprived of excess profits, but the prices at which they are allowed to sell coal inland is limited. Therefore I think there are very good reasons for excluding them from this tax.

Mr. CHAMBERLAIN: Before I reply to this Amendment, may I be allowed to make a statement in regard to business? We had hoped to conclude everything except the Land Values Duties to-night, but I am afraid that that will be impossible, and we ought not to ask the Committee to do it. After consultation with the Leader of the House, I propose to move to report Progress when we have finished the Corporation Profits Tax. I understand that the Land Values Duties will come first to-morrow, and that when we have disposed of them, we shall go on with the rest of the business.
My hon. Friend wishes us to exclude coalowners. I have a good deal of sympathy with the difficulties of the coal industry at the present time, but I cannot possibly accept this Amendment. I have
agreed to temporary exclusion in respect of public utility societies, but they are not merely subject in one form or another to a limitation in their charges and profits, but unlike the coalowners they enjoy no guarantee from the State. The coalowners do enjoy such a guarantee, and I cannot think myself it would be right, and I do not think this House would approve of such an exemption.

Sir C. CORY: The profits are made under the direction of the Coal Controller so that they are in a somewhat similar position to public utility companies.

Sir J. HARMOOD-BANNER: Mere sympathy is not much good. We shall have to pay the tax when our profits are absolutely limited to 5 per cent. pre-War standard. There are many concerns which are making a loss, even with the contribution of the State, and yet that contribution is now to have 5 per cent. deducted from it. We want something more than sympathy in such cases as that.

Amendment negatived.

Mr. WATERSON: I beg to move, in Sub-section (3), after the word "limited" ["of its members is limited"], to insert the words, "but does not include a society registered under the Building Societies Acts, 1874 to 1894."

Mr. CHAMBERLAIN: I do not know whether the hon. Gentleman will be content to wait. I cannot promise him any concession at this moment, but I should like to consider the position of the societies for which he is speaking in relation to the concession promised with respect to public utility societies. If he will allow the matter to stand over until Report, I shall be in a better position to answer him.

Mr. WATERSON: I shall be, pleased, on the suggestion of the right hon. Gentleman, and with the permission of the Committee, to withdraw the Amendment.

Amendment, by leave, withdrawn.

Captain GANZONI: I beg to move, in Sub-section (3), after the word "limited" ["of its members is limited"], to insert the words,
but shall not be deemed to include any company incorporated and conducted for the purpose of encouraging, promoting, and protecting the interests of agriculture, housing, or transport, or any general industry in the
United Kingdom, and not having a capital divided into shares.
This Amendment is designed to protect societies or companies which have a capital not divided into shares, and I rather hope the right hon. Gentleman may be able to assure us that these societies are not touched by the Corporation Tax. They are societies which can hardly be said to trade; they do not make a profit, or if they do it is entirely devoted to the interests for which the society has been established, and it is not divided up among the shareholders in the form of dividend or any other form. The societies particularly referred to are the Church Army, the Physical Society of London, the Smoke Abatement Institute, the Society of Medical Officers of Health, and the City and Guilds of London Institute for the Advancement of Technical Education. I hope the right hon. Gentleman may be able to assure me that in spite of his somewhat capacious maw for companies generally, companies such as those I have mentioned are not among those liable to Corporation Tax.

Mr. CHAMBERLAIN: As far as I understand the matter, the cases which my hon. and gallant Friend has in mind are those in which each member of a company guarantees a certain amount, which is not, in fact, paid up, and his liability is limited to the amount of his guarantee. I think that most of these companies carry on some kind of trading operations, although they are not engaged in trade for profit as a primary object. They do come within the scope of the Bill as drawn, but, if my hon. and gallant Friend will allow me, I will consider his suggestion, also, in the light of the concession which I have already made. The difficulty of making these concessions is that it opens the door, and it is difficult to know exactly where to draw the line. Having made that concession with regard to public utility companies, I should like to consider how far there is an analogy between them and such associations as my hon. and gallant Friend has in mind.

Captain GANZONI: Having regard to what the right hon. Gentleman has said, I shall not press the Amendment. I think it must be present to his mind that certain of these incorporated societies do trade to a certain extent, though their profits are nominal and are not divided up, but
are devoted to the purposes for which the societies were formed.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. MacCALLUM SCOTT: I desire to oppose the Motion that the Clause, as amended, stand part of the Bill; and I do so for two reasons. In the first place, this is not a Corporation Tax, although it is named a Corporation Tax in the Clause. A Corporation Tax would be a tax imposed on all corporations in respect of the privileges accorded to them in regard to trading under limited liability. It would be imposed upon them whether they made a profit or not. This, in substance and in effect, is an income Tax. It is a tax on some profits which have to be earned in a certain class of business. It is an Income Tax with two characteristics. In the first place, it is not applied to all incomes on the same principle, and in the second place it is not subject to the ordinary exemptions and abatements which apply to small incomes. In view of the Report of the Royal Commission on Income Tax, and of the fact that Income Tax is going to be dealt with more fully at a later stage, I think it is inadvisable to complicate the matter by dealing with it in this piecemeal way. It will introduce a wholly unnecessary measure of complication into the consideration of the subject of Income Tax in the near future. My second objection to this tax arises, to some extent, from its application to cooperative societies. That was not fully dealt with in the very short discussion that we had at the beginning of this sitting, and I think the Chancellor of the Exchequer made a mistake in closuring that discussion.

The CHAIRMAN: The hon. Member is criticising both the action of the Committee and the action of the Chair.

Mr. MacCALLUM SCOTT: I have no-desire to criticise the action of the Chair, and I think that, the matter having been raised, it was quite right to leave it to the decision of the Committee. Regarding this as an Income Tax, I can see no justification, on the showing of the Chancellor of the Exchequer, for applying it to co-operative societies. The whole
basis of the proposals of this Bill is that Income Tax should not be imposed upon co-operative societies.

The CHAIRMAN: The hon. Member must not, on the question, "That the Clause, as amended, stand part of the Bill," review the decisions of the Committee in proceeding through the various Amendments. He can deal only with the general question of the effect of the tax.

Mr. SCOTT: I do not propose to go in any detail into the arguments, but simply to state that one of the reasons why I desire to vote against the Clause is that in its revised and amended form it applies to co-operative societies. I will content myself by saying that I propose to vote against the Clause because, in the first place, it is a camouflaged Income Tax, and because, in the second place, it applies to co-operative societies.

Sir F. BANBURY: I sincerely trust that the Committee will reject this Clause, which is undoubtedly a second, or if you include Super-tax, a third Income Tax. My second objection to it is that it imposes a very great hardship upon companies whose profits are small. It may be all very well for a company earning 20 or 30 per cent. to contribute 2s. in the £, but to make shareholders in companies paying 3 and 4 per cent. pay 2s. or perhaps more, because, in some cases, it may be 8s., in addition to the enormous burden which they have already to bear, seems to me quite wrong. I believe that this tax originated in certain people evading Super-tax by turning themselves into limited liability companies, paying small dividends, and putting the rest to reserve. Some years ago it was suggested to me as an easy way of avoiding Super-tax by a former Member of the Government. I need not say That I did not follow his suggestion. I quite agree that sort of thing ought to be stopped, though I do not think that there are many instances, but this is not the right way to stop it. Do not, because something is wrong and you want to stop it, inflict a serious wrong upon a great number of people who have been doing their duty to the State and are doing no wrong. The tax this year is only going to bring in £3,000,000, and I trust, after the long discussion which
has shown the evils of it, that the Government will consent to withdraw the tax. If it be necessary, let us bring in legislation to deal with the evil which I have outlined without inflicting hardship upon a large number of people.

Colonel GRETTON: I trust that the Committee will not consent to this tax which is a third income tax with the particular vice that it taxes at the source and not on the income when it reaches the individual. As well as the reason given for the tax by the right hon. Baronet (Sir F. Banbury) there was the object that it was intended to take the place of the Excess Profits Duty. It is a new engine of taxation capable of inflation to any extent. Any Chancellor can come down and say that it is only 5 per cent, and that the country needed money and he might increase it to 10 per cent. It is a most formidable engine to use against the taxpayer. It has already landed the Government in difficulties and evidently the details have not been threshed out by the authors. It has caused a totally unnecessary and unfruitful controversy as to the cooperative societies. On all those grounds I propose to vote against this tax as an unnecessary impost on the subject and not needed for the expenses of the current year.

Lieut.-Commander ASTBURY: May I ask if an Amendment of which I gave notice [to leave out the Clause] has been ruled out of Order?

The CHAIRMAN: We are now on the Question, "That the Clause, as amended, stand part of the Bill," and if the hon. Member had an Amendment we have gone beyond that point.

11.0 P.M

Mr. BIGLAND: I have been present during nearly the whole of the Debate on this Clause and in my judgment the Committee has not been enlightened on many points. I have been utterly unable to ascertain the exact conditions under which some shareholders holding ordinary shares in limited companies may find themselves charged 2s. in the £, whilst others will only be charged 1s. I am told companies in which all the shares are ordinary shares cannot be charged more than 5 per cent., but if a company has a large amount of debenture and preference stock the holders of ordinary shares may find themselves charged 2s. in the £ before they pay
Income Tax, Super-tax and other taxes. The right hon. Baronet (Sir F. Banbury) has rightly said that if this Clause becomes the law of the land we are practically mulct in three Income Taxes, because this is undoubtedly another form of Income Tax. I sincerely trust, as the Chancellor of the Exchequer has already admitted that the tax would fall with great severity on all those companies whose dividend is now regulated by Act of Parliament, and they are not allowed to pay more than a certain specified dividend, that the Clause will not become the law for at least three years, and shall then be reconsidered. When we have such a statement as that from the Chancellor I take it that the Committee will be of the opinion that the whole Clause had better be regulated for three years, and that at the end of the three years we may reconsider the whole question of the tax. To my mind the principle of it is wrong, and its incidence will be most unjust and unfair, and on every ground, after the four hours' discussion we have had and the number of cases which have been proved, especially those limited liability cases which, through the War, have found themselves in great difficulties, unable to pay their preference dividends, unable to meet their debenture interest—there have been so many cases brought to light of intense hardship which will be brought about if this Clause becomes law, that I trust the Committee will put such pressure on the Chancellor that he will admit the judgment of the Committee is that Clause 44 should not stand part.

Lieut.-Commander ASTBURY: I think the course of the Debate has shown that this proposed new tax bristles with innumerable difficulties and will be most unjust in its application. Moreover, I consider this is the first time a tax has been levied without taking into account the ability of the person to pay. It is practically nothing more or less than a debenture charge against the ordinary shareholders, and in this way it is going to press most heavily on the working classes, the small investor and more than ever on that of the large middle class. It is all very well for the Chancellor of the Exchequer to say it is only on an entity. We all know that entity is distributed amongst the shareholders, whether preference or ordinary shareholders, and it means that if any company is in a position out of its
profits only to pay 5 per cent., with the deduction of this tax they will not be able to pay that 5 per cent., and in that way the individual is paying more than Income Tax. He is in fact paying double tax. An anamoly is that a man or woman will be taxed for something that he never receives. An investor who has £1,000 in any company gets a dividend of 5 per cent. £50 a year. He is below the limit of the assessment for Income Tax. He will nevertheless have indirectly paid this tax and will have no means of getting it back. I want to make that a very strong point for the middle classes and also for those people who have saved till they got to the age of 60 and provided themselves with the small amount to live on for the rest of their lives, and it is quite unfair that they should be subjected to this tax. It means that, although this is going to hit the wealthy man it is going to hit the poorer classes to a far greater extent. For this reason that the ordinary man of wealth will invest his money in debenture stock and Government securities, whereas the middle-class people, with less capital to invest, will place their money in ordinary shares. Therefore, it is going to hit these people far worse.
This tax will deter the great mass of people from investing in ordinary industrial shares, because they know that even in good times on industrial shares they may get 7 or 8 per cent.; but they have to consider that there will be this debenture charge before their ordinary shares, and they will be more tempted to invest, if they can, in debentures or in Government securities. That is a reason why I consider that this tax will be a bar on industry.
I am not going to indulge in the language of hon. Members who declare that this tax is going to destroy industry, but I do say that we are saddled with Excess Profits Duty, and by putting this tax on the top of the Excess Profits Duty, you are laying a burden on industry which will fail to give the amount that you expect to receive. I am speaking not only as a Member of this House, but as a director of the Manchester Chamber of Commerce. The Chancellor of the Exchequer knows that we supported him on the Excess Profits Duty, of 60 per cent., but I should like to draw his attention to the fact that in Manchester this tax is looked upon in a far worse light
than the Excess Profits Duty. In the Excess Profits Duty you are taxing a man on his ability to pay. You do not take his excess profits unless he has made something, but in this tax you are taking his profit whether he has the ability to pay or not and you are going back and putting the tax on his pre-War standard. Therefore, you are hitting him both ways, hitting him with Excess Profits Duty and on his pre- War standard. I urge the Chancellor of the Exchequer to withdraw this tax for the present. It is with great reluctance that I make this appeal, because I know the terrible burden with which the right hon. Gentleman has to contend. If it had not been that I consider it to be my bounden duty, speaking not only for the traders in Lancashire, and especially for the textile trade, which is the second largest industry in the country, and also for the great middle class, I should have been only too happy to have remained silent and not to have made a plea to add to the burden of the right hon. Gentleman.

Major-General SEELY: Many of us who would wish to give general support to the principle embodied in this Clause are in a difficulty, owing to the words which the Chancellor of the Exchequer used in reference to the very important Amendment moved by the hon. Member for Kettering (Mr. Waterson). Many of us desire to support the Government in spite of the remarks of the hon. Member who has just spoken, but we do think that, as some exemptions have been made, the remarkably strong case for the building societies ought certainly to be included in the exemption. The matter was not debated, because the Chancellor of the Exchequer indicated that he would consider it. Having been a Member of the House for 20 years I never heard a concession which was in its essence more thin than the actual words of the Chancellor of the Exchequer. The case of the building societies is very strong—owing to various causes, the failure of the Government to build houses, and the efforts which the State must make by every means in its power, including taxation, to get houses built. The Chancellor of the Exchequer said that he would consider the matter, but he could give no promise whatever. If the Financial Secretary could give us a little more
comfort in the matter, it would make it easier for many of us who wish to support this Clause to go into the Lobby in support of it, but this is a point to which we attach such importance that we are justified in asking for a clearer statement with regard to the concessions that may possibly be made.

Sir J. HARMOOD-BANNER: Before we part with this Clause we ought to appreciate the reason of its creation. It is certainly peculiar. The Excess Profits Duty was very much in the minds of all the trading community for a considerable time, and I happened to be a party to introducing a deputation to the Chancellor of the Exchequer when there was suggested, as an alternative to the Excess Profits Duty, the tax now brought forward in Clause 44. To the astonishment of the trading community, when the Finance Bill was brought forward, they found that not only was the Excess Profits Duty raised from 40 per cent. to 60 per cent., but in addition there was this 5 per cent. Corporation Tax. It was rather alarming that their own suggestion was accepted by Somerset House authorities and by the Government, and one had this penal Clause in addition to the Excess Profits Duty. I would like to know whether this Clause is intended as an educational measure for the Government in order that they may appreciate truly what they can do with this 5 per cent. instead of a graduated Excess Profits Duty, or whether it is intended to have a double tax, because it would be some consolation to many of us if the Chancellor of the Exchequer would inform us that this was an educational process for ascertaining a new method of taxation to take the place of the Excess Profits Duty? But we have some apprehension when we find him applying the double whip to us. It would be very much better to be more generous to those who made this suggestion to withdraw this £3,000,000 from the present budget, and allow it to stand over until he had more thoroughly studied what the 5 per cent. would give. I would like to refer those who study the Scriptures to the case of Rehoboam. He was asked what he would do in a certain case, and he said, "My father chastised you with whips, but I will chastise you with scorpions. My little finger is bigger than my father's loins." We have seen a great deal of the little finger of the Excess
Profits Duty. We are always ready to assist in paying our taxes, but we never did expect, when we suggested an alternative, that it would be taken as the scorpion to chastise us in the manner proposed in this tax. I venture to appeal to the Chancellor of the Exchequer to withdraw the Clause.

Mr. BALDWIN: I am very much moved by the illustration of my hon. Friend. I would rather put it that we are, all of us in this country, in the position of the Jews who went to Jerusalem to be taxed, and that it is in connection with the carrying out of this process that we are all gathered here this evening. If we cast our minds back to the speech of the Chancellor of the Exchequer on the introduction of his financial statement for the year, it will be recalled that he said he was going to ask for a great sacrifice, because he believed that the circumstances of the country required a great sacrifice. To a certain extent he received, at that time the sympathy of the House, because they gave him the Second Reading of the Finance Bill without a division. I am quite aware that that in no way prejudices any Member, or any section of the Committee, in Debate at this stage, but I think it does mean that we accepted then, as I am sure most of us accept now, the fact that we have still this year, and perhaps for some little time longer yet, to continue making those financial sacrifices which we made, and made with much better spirit naturally, during the War.
The hon. Member said, "Is this Corporation Profit Tax to remain as a double tax, in harness with the Excess Profits Tax?" The answer to that is "No." The idea in the mind of the Chancellor of the Exchequer in devising this tax was to introduce a tax on the industry of the country which might be left when the Excess Profits Tax were removed, and which would help to provide that increased revenue which we know will be required for a great many years, although we hope, and with reason, that before many years are gone we shall be able to subsist by raising a good deal less money than we are raising to-day. Of course, a new tax of this kind, or of any kind, is bound to be examined with great care, and it is certain to cause a great deal of criticism—criticism from
those who quite rightly are anxious to make it fair and efficient, and criticism from those who are anxious to see it set aside, who, perhaps in Debate and in the process of deputations, express themselves as only too ready to find an alternative, but whose real desire is to get rid of the tax altogether. I cannot hold out any hope that the Government are prepared to get rid of this tax altogether, but I hope also that they are not showing themselves unwilling in any way to examine and to have examined the details of this tax critically, and to try and meet as far as they can, when they have had further time to reflect on some of the difficult questions which have been raised, on the Report stage, the various views which have been expressed in the course of the Debate.
My right hon. Friend, the Member for Ilkeston (Major-General Seely) put a point to me with reference to an undertaking which the Chancellor gave in answer to an Amendment moved and then very courteously withdrawn by my hon. Friend, the Member for Kettering (Mr. Waterson). The Chancelor of the Exchequer is not here at this moment, but I heard what he said. I think I know what is in his mind, and I will try and express his pledge in my own words, which may or may not give the satisfaction which my right hon. Friend desires. The Chancellor has undertaken this evening to define, on the Report stage what he means by public utility companies, with a view to their exemption for the time being from the incidence of this tax. He regards the building societies sympathetically. That I can say without qualification, but until he comes to examine the matter—and he has had no opportunity of doing that yet—it is impossible for him to say whether he will be able to utilise that phrase, a public utility company, to embace these societies. Beyond that I am afraid I cannot go. He approaches it sympathetically, he is anxious to do it if he can, and he will in due course put down a Clause upon the paper. I need hardly point out to my hon. Friend that if the Chancellor should not find himself able to do what he desires to do, my hon. Friend the Member for Kettering will have ample time in which to bring up this matter again and have it debated on the Report stage. I hope the Chancellor
and myself may be able to meet him in the fullest way he desires. The principle of this tax has now been clearly defined, and the issue is very simple. It is between those who are willing to help the Chancellor of the Exchequer to perfect a new instrument of taxation with a view to the future needs of the country and those who desire to throw out this new tax.

Mr. PRETYMAN: No.

Mr. BALDWIN: I do not blame the attitude, but it is an attitude that I thought I perceived from the speeches of some of those hon. Members who have spoken, and of course, for those who feel that a tax of this kind cannot be made equitable or workable, they must vote against it, but I think the good sense of the Committee will be given to the support of the Chancellor of the Exchequer in this matter, and that we may now be allowed to take a Division upon this Clause and bring our proceedings to an end at not too late an hour to-night.

Mr. PRETYMAN: I feel very strongly on this matter, and I do not think I should have risen again but for something which was said by my right hon. Friend. I submit to the Committee that the statement he has made that this is intended as a permanent tax to replace the Excess Profits Duty throws upon us the great responsibility of starting a totally new taxation. This is a most serious new departure, and I oppose this tax freely because, so far as I am aware, it will not touch me at all, and if I spoke from a personal point of view I should say that this was a tax which did not touch land, in which I am interested, and would stand aside and say, let this tax fall upon companies in which I am not interested, but I cannot take that attitude. I believe everyone of us who thinks deeply on financial questions has a responsibility to the country, on purely national grounds, to see that our taxation should be based on sound principles. I only fought one tax furiously before, and that was the Land Taxes. I was interested then, but my main reason for fighting them was because I believed them to be unsound in principle, as I believe this tax to be unsound in principle. The Chancellor of the Exchequer has removed from the orbit of the tax an immense number of industries. Surely if a tax is to be applied to a great
area of trade it ought to cover the whole area without exception, but you are piling this tax upon a small proportion of interests. The whole of the national securities are to go free, the railways are to go free for three years, and the dock companies and statutory companies and. a large proportion of others are to go free. What is left? Nothing but a bad principle, and the Chancellor of the Exchequer suggested this was a Corporation Tax. It is not a Corporation Tax, and its title is not Corporation Tax, but Corporation Profits Tax. Corporation Profits are already taxed for Income Tax under Schedule D, and here are the taxing words of the Statute:
Tax under this Schedule shall be charged in respect of—
(a) The annual profits or gains arising or accruing—
(i)to any person residing in the United Kingdom from any kind of property whatever, whether situate in the United Kingdom or elsewhere.
All this profit is included in this tax, May I call attention to Clause 45 of this Bill, which says in Sub-section (2):
Subject to the provisions of this Act profits shall be the profits and gains determined on the same principles as those on which the profits and gains of a trade would be determined for the purposes of Schedule D set out in the First Schedule to the Income Tax Act, 1918.
There you have direct proof that this is nothing but Income Tax, and I have proved that it is nothing but an extension of Income Tax, but unaccompanied by all the exemptions and abatements which the Royal Commission tried to elaborate in order to make the Income Tax fair. Yet here you have an Income Tax up to 2s. in the £ which may be levied on people who get absolutely nothing out of the company. Supposing there is a small profit on the ordinary shares of the company subject to this tax, which might be sufficient to pay, say, one per cent. to the ordinary shareholders. The whole of that one per cent. might easily be absorbed by this ten per cent. limit which is imposed by this tax upon the total profits of the company. Therefore, although there might be enough to pay some very poor people the very small dividend of one per cent. before a single penny of it reached them it would be absorbed by this tax, where other people would pay nothing. May I add this—for really this is an important matter and a national issue—and though
I do not want to defend the Committee [HON. MEMBERS: "Go on!"] I say that this tax will fall upon people who are absolutely exempt from taxation under the Income Tax Acts, entirely exempt, yet this tax will fall upon them.
The point I wish to make is this, that direct taxation of this kind is only paid by a very small proportion of the responsible voters of this country. I regard it as most injurious that this direct taxation, which though it bears three or four different names, all falls upon the same identical source, and diminishes it. Each different call diminishes the amount obtainable by the other call. It is most important in the vital financial interests of this country that the voters, as a whole, should realise the extent of the total of their direct taxation. As it is they are only told, "Here is a six shillings Income Tax." Here you are actually increasing your Income Tax to eight shillings, though you do not say so. You camouflage it, and hide it up, and put on the two shillings in one direction and six shillings in the other. I entirely recognise the friendly way in which the Chancellor has admitted my criticisms of this Bill. I desire to make no attack upon him, nor upon the right hon. Gentleman (Mr. Baldwin), who has just spoken, and whose remarks I listened to with the greatest regard. I have no desire to attack the Government. There is the necessity for raising the money. So far from any other desire, I wish to help the Chancellor to raise the money. I will gladly help him and be prepared to sanction any sacrifice. I said so in the Debate on the Excess Profits Duty. This, at any rate, has the merit of being only temporary. If this Corporation Profits Tax were only put forward as a temporary expedient the principles of which were not advocated as permanent, I would not say so much. But we have it proposed as permanent. I regard it as vicious. Therefore much as I desire to help the Chancellor, and as I would help him if he would say that this is a temporary tax, I cannot. We know it is a vicious tax. Because the tax is partial, unfair, and has the vices to which I have referred, while I would vote for the Government if this were a temporary measure, as it is proposed as a permanent tax, whatever the consequences may be, I am bound to vote against it and to ask others to do so.

Mr. BONAR LAW (Leader of the House): If the Committee will allow me, I should like to say a few words in answer to the speech of my right hon. Friend, the sincerity of which I fully realise. The position really is this. We have got a tremendous burden to bear. It has got to be borne by somebody. The view of the Government was that so long as industry was in its present position, or anything like it, industry should bear the burden beyond that borne by people with fixed incomes derived from other sources. When my right hon. Friend says that he regards this tax as permanent, he means only so long as it is right in the interests of the country that this special tax should be kept on industries. What my right hon. Friend the Chancellor of the Exchequer had in view was that it might possibly be found that either by this Corporation Profits Tax, or by some adaptation of it, we might get the proper method of obtaining the special revenue from industries which the needs of the country at the present time demand. Nobody, I think, would maintain—I certainly should not—that if trade arrived at the position that it could not bear any other burden than is at present borne, the whole position must not be reconsidered. That is obvious. I cannot imagine that this Committee, or the country as a whole, would deny the justice of the foundation upon which the tax is based. Since this burden has to be borne, it ought to fall upon the people who are making the profits, and not on those with fixed incomes. No one suggests that any tax put on any particular section of the people is a good tax in itself. All we say is that in the special circumstances arising out of the War, it is necessary to raise this money, although many hon. Members seem to think we can defer it. The burden is there; we have to bear it, and my contention is that in the present circumstances the proposal of my right hon. Friend is a fair one and one which the Committee ought to adopt.

Mr. G. TERRELL: I wish to say a few words on the subject of this tax. [HON. MEMBERS: "Divide, divide."]

The DEPUTY-CHAIRMAN: If the Committee will give the hon. Member a few moments, perhaps he will conclude his remarks.

Mr. TERRELL: It is only on very rare occasions that I address the House[HON. MEMBERS: "Divide, divide."]

The DEPUTY-CHAIRMAN: The Committee might let the hon. Member proceed.

Mr. TERRELL: All I wish to say is this: Last night the Excess Profits Duty received a considerable amount of support from a certain section of this Committee, and to-night's Debate shows that to a very large extent those who were in favour of the Excess Profits Duty are vigorously opposed to the Corporation Tax. There are two duties before the Committee, both of them admittedly bad. The Chancellor of the Exchequer has told us he must get the money, and it is therefore a choice between two evils. The Corporation Tax is, I think, the less harmful of the two, because there is in it a measure of equality in the sacrifice which has to be made. I shall, therefore, on this occasion, support the Government. The Manchester Chamber of Commerce— [Interruption. ]

Major Sir KEITH FRASER: On a point of Order—

The DEPUTY-CHAIRMAN: I hope the hon. Member will be permitted to conclude his speech.

Sir F. BANBURY: rose in his place, and claimed to move "That the Question be now put."

Mr. TERRELL: I may say, Sir—

The DEPUTY-CHAIRMAN: Does the hon. Member wish to continue his speech?

Mr. TERRELL: Yes.

The DEPUTY-CHAIRMAN: The Question is "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 227; Noes, 21.

Division No. 207.]
AYES.
[11.45 p.m.


Adair, Rear-Admiral Thomas B. S.
Conway, Sir W. Martin
Henderson, Major V. L. (Tradeston)


Agg-Gardner, Sir James Tynte
Coote, Colin Reith (Isle of Ely)
Henry, Denis S. (Londonderry, S.)


Amery, Lieut.-Col. Leopold C. M. S.
Cope, Major Wm.
Herbert, Dennis (Hertford, Watford)


Archer-Shee, Lieut.-Colonel Martin
Davidson, Major-General Sir J. H.
Hills, Major John Waller


Armitage, Robert
Davies, Alfred Thomas (Lincoln)
Hinds, John


Astbury, Lieut.-Commander F. W.
Davies, Thomas (Cirencester)
Hirst, G. H.


Atkey, A. R.
Davies, Sir William H. (Bristol, S.)
Hohler, Gerald Fitzroy


Baird, Sir John Lawrence
Dawes, James Arthur
Hood, Joseph


Baldwin, Rt. Hon. Stanley
Dennis, J. W. (Birmingham, Deritend)
Hope, Sir H. (Stirling & Cl'ckm'nn'n,W.)


Balfour, George (Hampstead)
Dewhurst, Lieut.-Commander Harry
Hope, James F. (Sheffield, Central)


Banbury, Rt. Hon. Sir Frederick G.
Duncannon, Viscount
Hope, Lt.-Col. Sir J. A. (Midlothian)


Banner, Sir John S. Harmood-
Du Pre, Colonel William Baring
Hopkinson, A. (Lancaster, Mossley)


Barnston, Major Harry
Edgar, Clifford B.
Horne, Sir R. S. (Glasgow, Hillhead)


Barrand, A. R.
Edwards, Major J. (Aberavon)
Hotchkin, Captain Stafford Vere


Barrie, Rt. Hon. H. T. (Lon'derry, N.)
Elliot, Capt. Walter E. (Lanark)
Hunter, General Sir A. (Lancaster)


Barton, Sir William (Oldham)
Eyres-Monsell, Commander B. M.
Hunter-Weston, Lieut-Gen. Sir A. G.


Bell, Lieut.-Col. W. C. H. (Devizes)
Falcon, Captain Michael
Hurd, Percy A.


Bellairs, Commander Carlyon W.
Fell, Sir Arthur
Jephcott, A. R.


Betterton, Henry B.
Fildes, Henry
Jodrell, Neville Paul


Bigland, Alfred
FitzRoy, Captain Hon. E. A.
Johnstone, Joseph


Bird, Sir A. (Wolverhampton, West)
Ford, Patrick Johnston
Jones, Sir Edgar R. (Merthyr Tydvil)


Blair, Reginald
Foreman, Henry
Jones, Henry Haydn (Merioneth)


Blane, T. A.
Forestier-Walker, L.
Jones, J. T. (Carmarthen, Llanelly)


Borwick, Major G. O.
Forrest, Walter
Jones, William Kennedy (Hornsey)


Boscawen, Rt. Hon. Sir A. Griffith-
Foxcroft, Captain Charles Talbot
Kellaway, Rt. Hon. Fredk. George


Bowerman, Rt. Hon. Charles W.
Fremantle, Lieut.-Colonel Francis E.
Kidd, James


Bowyer, Captain G. E. W.
Galbraith, Samuel
King, Commander Henry Douglas


Brassey, Major H. L. C.
Gange, E. Stanley
Knights, Capt. H. N. (C'berwell, N.)


Bridgeman, William Clive
Ganzoni, Captain Francis John C.
Lane-Fox, G. R.


Briggs, Harold
Gardner, Ernest
Law, Alfred J. (Rochdale)


Broad, Thomas Tucker
Gibbs, Colonel George Abraham
Law, Rt. Hon. A. B. (Glasgow, C.)


Brown, Captain D. C.
Gilbert, James Daniel
Lawson, John J.


Bruton, Sir James
Gilmour, Lieut.-Colonel John
Lewis, Rt. Hon. J. H. (Univ., Wales)


Burdon, Colonel Rowland
Glyn, Major Ralph
Lewis, T. A. (Glam., Pontypridd)


Butcher, Sir John George
Goff, Sir R. Park
Lister, Sir R. Ashton


Cape, Thomas
Gould, James C.
Lloyd-Greame, Major Sir P.


Carew, Charles Robert S.
Graham, D. M. (Lanark, Hamilton)
Locker-Lampson, Com. O. (H'tingd'n)


Carr, W. Theodore
Graham, R. (Nelson and Colne)
Lorden, John William


Casey, T. W.
Grayson, Lieut.-Colonel Sir Henry
Lort-Williams, J.


Cayzer, Major Herbert Robin
Green, Albert (Derby)
Loseby, Captain C. E.


Cecil, Rt. Hon. Evelyn (Birm., Aston)
Greene, Lt.-Col. Sir W. (Hack'y, N.)
Lunn, William


Chamberlain, Rt. Hn. J. A.(Birm.,W.)
Greenwood, William (Stockport)
Lyle, C. E. Leonard


Churchill, Rt. Hon. Winston S.
Greig, Colonel James William
McLaren, Robert (Lanark, Northern)


Clay, Lieut.-Colonel H. H. Spender
Gretton, Colonel John
Macleod, J. Mackintosh


Clough, Robert
Grundy, T. W.
Macmaster, Donald


Coates, Major Sir Edward F.
Hacking, Captain Douglas H.
McNeill, Ronald (Kent, Canterbury)


Coats, Sir Stuart
Hallwood, Augustine
Marriott, John Arthur Ransome


Cobb, Sir Cyril
Hall, F. (York, W. R., Normanton)
Mitchell, William Lane


Colvin, Brig.-General Richard Beale
Hayday, Arthur
Montagu, Rt. Hon. E. S.


Moore, Major-General Sir Newton J.
Roberts, Sir S. (Sheffield, Ecclesall)
Thomson, F. C. (Aberdeen, South)


Moore-Brabazon, Lieut.-Col. J. T. C.
Robinson, S. (Brecon and Radnor)
Thomson, T. (Middlesbrough, West)


Moreing, Captain Algernon H.
Robinson, Sir T (Lancs., Stretford)
Tootill, Robert


Murray, John (Leeds, West)
Rodger, A. K.
Townley, Maximilian G.


Murray, Major William (Dumfries)
Rose, Frank H.
Tryon, Major George Clement


Nall, Major Joseph
Roundell, Colonel R. F.
Vickers, Douglas


Neal, Arthur
Royce, William Stapleton
Wallace, J.


Norris, Colonel Sir Henry G.
Royden, Sir Thomas
Walters, Sir John Tudor


Palmer, Charles Frederick (Wrekin)
Sanders, Colonel Sir Robert A.
Weston, Colonel John W.


Parkinson, John Allen (Wigan)
Seely, Major-General Rt. Hon. John
Wheler, Lieut.-Colonel C. H.


Pease, Rt. Hon. Herbert Pike
Shaw, Thomas (Preston)
White, Lieut.-Col. G. D. (Southport)


Pennefather, De Fonblanque
Shaw, William T. (Forfar)
Whitla, Sir William


Perring, William George
Short, Alfred (Wednesbury)
Wild, Sir Ernest Edward


Philipps, Gen. Sir I. (Southampton)
Sitch, Charles H.
Williams, Lt.-Com. C. (Tavistock)


Pollock, Sir Ernest M.
Smith, Harold (Warrington)
Wills, Lieut.-Colonel Sir Gilbert


Pownall, Lieut.-Colonel Assheton
Sprot, Colonel Sir Alexander
Wilson, Rt. Hon. J. W. (Stourbridge)


Preston, W. R.
Stanley, Major H. G. (Preston)
Wilson, Colonel Leslie O. (Reading)


Pretyman, Rt. Hon. Ernest G.
Stanton, Charles B.
Wilson, W. Tyson (Westhoughton)


Pulley, Charles Thornton
Starkey, Captain John R.
Winterton, Major Earl


Purchase, H. G.
Steel, Major S. Strang
Wood, Hon. Edward F. L. (Ripon)


Rae, H. Norman
Stephenson, Colonel H. K.
Wood, Sir J. (Stalybridge & Hyde)


Ramsden, G. T.
Stewart, Gershom
Wood, Major S. Hill- (High Peak)


Raw, Lieutenant-Colonel N.
Sturrock, J. Leng
Young, Sir Frederick W. (Swindon)


Rees, Sir J. D. (Nottingham, East)
Sugden, W. H.
Younger, Sir George


Remnant, Sir James
Sutherland, Sir William



Rendall, Athelstan
Sykes, Sir Charles (Huddersfield)
TELLERS FOR THE AYES.—


Richardson, Alexander (Gravesend)
Talbot, G. A. (Hemel Hempstead)
Lord E. Talbot and Mr. Dudley


Richardson, R. (Houghton-le-Spring)
Thomas, Brig.-Gen. Sir O. (Anglesey)
Ward.


NOES.


Acland, Rt. Hon. F. D.
Maclean, Neil (Glasgow, Govan)
Tillett, Benjamin


Barnes, Major H. (Newcastle, E.)
Morgan, Major D. Watts
Walsh, Stephen (Lancaster, Ince)


Benn, Captain Wedgwood (Leith)
Newbould, Alfred Ernest
Waterson, A. E.


Brace, Rt. Hon. William
Newman, Sir R. H. S. D. L. (Exeter)
White, Charles F. (Derby, Western)


Edwards, C. (Monmouth, Bedwellty)
Remer, J. R.
Williams, Aneurin (Durham, Consett)


Finney, Samuel
Scott, A. M. (Glasgow, Bridgeton)



Hartshorn, Vernon
Sexton, James
TELLERS FOR THE NOES.—


Holmes, J. Stanley
Thorne, G. R. (Wolverhampton, E.)
Lieut.-Commander Kenworthy and




Major Entwistle.

Question put accordingly "That the Clause, as amended, stand part of the Bill."

The Committee divided: Ayes, 145; Noes, 99.

Division No. 208.]
AYES.
[11.55 p.m.


Agg-Gardner, Sir James Tynte
Dawes, James Arthur
Jephcott, A. R.


Amery, Lieut.-Col. Leopold C. M. S.
Duncannon, Viscount
Jodrell, Neville Paul


Archer-Shee, Lieut.-Colonel Martin
Du Pre, Colonel William Baring
Jones, Sir Edgar R. (Merthyr Tydvil)


Baird, Sir John Lawrence
Edgar, Clifford B.
Jones, Henry Haydn (Merioneth)


Baldwin, Rt. Hon. Stanley
Entwistle, Major C. F.
Jones, J. T. (Carmarthen, Llanelly)


Barnston, Major Harry
Eyres-Monsell, Commander B. M.
Jones, William Kennedy (Hornsey)


Barrand, A. R.
Falcon, Captain Michael
Kellaway, Rt. Hon. Fredk. George


Barrie, Rt. Hon. H. T. (Lon'derry, N.)
Fildes, Henry
Kidd, James


Barton, Sir William (Oldham)
Ford, Patrick Johnston
King, Commander Henry Douglas


Bell, Lieut.-Col. W. C. H. (Devizes)
Foreman, Henry
Lane-Fox, G. R.


Bellairs, Commander Carlyon W.
Forestier-Walker, L.
Law, Alfred J. (Rochdale)


Betterton, Henry B.
Forrest, Walter
Law, Rt. Hon. A. B. (Glasgow, C.)


Blair, Reginald
Fremantle, Lieut.-Colonel Francis E.
Lewis, Rt. Hon. J. H. (Univ., Wales)


Borwick, Major G. O.
Ganzoni, Captain Francis John C.
Lewis, T. A. (Glam., Pontypridd)


Boscawen, Rt. Hon. Sir A. Griffith-
Gardner, Ernest
Locker-Lampson, Com. O. (H'tingd'n)


Brassey, Major H. L. C.
Gibbs, Colonel George Abraham
Lorden, John William


Bridgeman, William Clive
Gilbert, James Daniel
Lort-Williams, J.


Briggs, Harold
Gilmour, Lieut.-Colonel John
Loseby, Captain C. E.


Broad, Thomas Tucker
Glyn, Major Ralph
Lyle, C. E. Leonard


Brown, Captain D. C.
Goff, Sir R. Park
Macleod, J. Mackintosh


Bruton, Sir James
Grayson, Lieut.-Colonel Sir Henry
Macmaster, Donald


Butcher, Sir John George
Green, Joseph F. (Leicester, W.)
McNeill, Ronald (Kent, Canterbury)


Carew, Charles Robert S.
Greene, Lt.-Col. Sir W. (Hack'y, N.)
Mitchell, William Lane


Carr, W. Theodore
Greenwood, William (Stockport)
Montagu, Rt. Hon. E. S.


Cayzer, Major Herbert Robin
Greig, Colonel James William
Moore-Brabazon, Lieut.-Col. J. T. C.


Chamberlain, Rt. Hn. J A. (Birm. W.)
Hacking, Captain Douglas H.
Moreing, Captain Algernon H.


Churchill, Rt. Hon. Winston S.
Hailwood, Augustine
Murray, John (Leeds, West)


Clay, Lieut.-Colonel H. H. Spender
Henry, Denis S. (Londonderry, S.)
Neal, Arthur


Coates, Major Sir Edward F.
Herbert Dennis (Hertford, Watford)
Pease, Rt. Hon. Herbert Pike


Cobb, Sir Cyril
Holmes, J. Stanley
Pollock, Sir Ernest M.


Colvin, Brig.-General Richard Beale
Hope, Sir H. (Stirling & Cl'ckm'nn'n,W.)
Pownall, Lieut.-Colonel Assheton


Conway, Sir W. Martin
Hope, James F. (Sheffield, Central)
Pulley, Charles Thornton


Cope, Major Wm.
Hopkinson, A. (Lancaster, Mossley)
Purchase, H. G.


Davidson, Major-General Sir J. H.
Horne, Sir R. S. (Glasgow, Hillhead)
Raw, Lieutenant-Colonel N.


Davies, Alfred Thomas (Lincoln)
Hunter, General Sir A. (Lancaster)
Rees, Sir J. D. (Nottingham, East)


Davies, Thomas (Cirencester)
Hunter-Weston, Lieut-Gen. Sir A. G.
Remer, J. R.


Rendall, Atheistan
Sturrock, J. Leng
Weston, Colonel John W.


Roberts, Sir S. (Sheffield, Ecclesall)
Sugden, W. H.
Wheler, Lieut.-Colonel C. H.


Robinson, S. (Brecon and Radnor)
Sutherland, Sir William
White, Lieut.-Col. G. D. (Southport)


Robinson, Sir T. (Lancs., Stretford)
Sykes, Sir Charles (Huddersfield)
Whitla, Sir William


Rodger, A. K.
Talbot, G. A. (Hemel Hempstead)
Wild, Sir Ernest Edward


Roundell, Colonel R. F.
Terrell, George (Wilts, Chippenham)
Williams, Lt.-Com. C. (Tavistock)


Sanders, Colonel Sir Robert A.
Thomson, F. C. (Aberdeen, South)
Wills, Lieut.-Colonel Sir Gilbert


Seely, Major-General Rt. Hon. John
Thomson, T. (Middlesbrough, West)
Wilson, Colonel Leslie O. (Reading)


Smith, Harold (Warrington)
Townley, Maximilian G.
Winterton, Major Earl


Stanley, Major H. G. (Preston)
Tryon, Major George Clement
Wood, Major S. Hill. (High Peak)


Starkey, Captain John R.
Vickers, Douglas



Stephenson, Colonel H. K.
Wallace, J.
TELLERS FOR THE AYES.—


Stewart, Gershom
Walters, Sir John Tudor
Lord E. Talbot and Mr. Dudley




Ward.


NOES.


Acland, Rt. Hon. F. D.
Graham, D. M. (Lanark, Hamilton)
Pennefather, De Fonblanque


Adair, Rear-Admiral Thomas B. S.
Graham, R. (Nelson and Colne)
Perring, William George


Armitage, Robert
Greame, Sir Philip Lloyd-
Preston, W. R.


Astbury, Lieut.-Commander F. W.
Grundy, T. W.
Rae, H. Norman


Atkey, A. R.
Hall, F. (York, W. R., Normanton)
Ramsden, G. T.


Balfour, George (Hampstead)
Hartshorn, Vernon
Remnant, Sir James


Banbury, Rt. Hon. Sir Frederick G.
Hayday, Arthur
Richardson, Alexander (Gravesend)


Banner, Sir John S. Harmood-
Henderson, Major V. L. (Tradeston)
Richardson, R. (Houghton-le-Spring)


Barker, Major Robert H.
Hills, Major John Waller
Rose, Frank H.


Barnes, Major H. (Newcastle, E.)
Hinds, John
Royce, William Stapleton


Benn, Captain Wedgwood (Leith)
Hirst, G. H.
Royden, Sir Thomas


Bigland, Alfred
Hohler, Gerald Fitzroy
Scott, A. M. (Glasgow, Bridgeton)


Blane, T. A.
Hood, Joseph
Sexton, James


Bowerman, Rt. Hon. Charles W.
Hotchkin, Captain Stafford Vere
Shaw, Thomas (Preston)


Bowyer, Captain G. E. W.
Hurd, Percy A.
Shaw, William T. (Forfar)


Brace, Rt. Hon. William
Johnstone, Joseph
Short, Alfred (Wednesbury)


Cape, Thomas
Kenworthy, Lieut.-Commander J. M.
Sitch, Charles H.


Casey, T. W.
Knights, Capt. H. N. (C'berwell, N.)
Sprot, Colonel Sir Alexander


Cecil, Rt. Hon. Evelyn (Birm., Aston)
Lawson, John J.
Stanton, Charles B.


Clough, Robert
Lister, Sir R. Ashton
Steel, Major S. Strang


Coats, Sir Stuart
Lunn, William
Thomas, Brig.-Gen. Sir O. (Anglesey)


Coote, Colin Reith (Isle of Ely)
McLaren, Robert (Lanark, Northern)
Thorne, G. R. (Wolverhampton, E.)


Cory, Sir C. J. (Cornwall, St. Ives)
Maclean, Neil (Glasgow, Govan)
Tillett, Benjamin


Davies, Sir William H. (Bristol, S.)
Mallalieu, F. W.
Tootill, Robert


Dennis, J. W. (Birmingham, Deritend)
Marriott, John Arthur Ransome
Walsh, Stephen (Lancaster, Ince)


Dewhurst, Lieut.-Commander Harry
Moore, Major-General Sir Newton J.
Waterson, A. E.


Edwards, C. (Monmouth, Bedwellty)
Morgan, Major D. Watts
White, Charles F. (Derby, Western)


Elliot, Capt. Walter E. (Lanark)
Nall, Major Joseph
Williams, Aneurin (Durham, Consett)


Fell, Sir Arthur
Newbould, Alfred Ernest
Wilson, W. Tyson (Westhoughton)


FitzRoy, Captain Hon. E. A.
Newman, Sir R. H. S. D. L. (Exeter)
Wood, Hon. Edward F. L. (Ripon)


Foxcrott, Captain Charles Talbot
Norris, Colonel Sir Henry G.
Young, Sir Frederick W. (Swindon)


Galbraith, Samuel
O'Grady, Captain James



Gange, E. Stanley
Palmer, Charles Frederick (Wrekin)
TELLERS FOR THE NOES.—


Gould, James C.
Parkinson, John Allen (Wigan)
Mr. Pretyman and Colonel Gretton.


Question, "That the Clause, as amended, stand part of the Bill," put, and agreed to.

CLAUSE 45.—(Determination of Profits.)

For the purpose of this Part of this Act profits shall be taken to be the actual profits arising in the accounting period, and shall not be computed by reference to the income tax year or on the average of any years.

(2)Subject to the provisions of this Act profits shall be the profits and gains determined on the same principles as those on which the profits and gains of a trade would be determined for the purposes of Schedule D. set out in the First Schedule to the Income Tax Act, 1918, as amended by any subsequent enactment, whether the profits are assessable to income tax under that Schedule or not:

Provided that for the purpose of this Part of this Act—

(a)profits shall include all profits and gains arising from any lands, tenements, or hereditaments forming part of the assets of a company, and all interest, dividends and other income arising from investments or any other source and received in
2312
the accounting period, not being interest, dividends or income received from a company liable to be assessed to corporation profits tax in respect thereof, and no deduction shall be allowed on account of the annual value of any premises used for the purposes of the company:
(b)deductions shall be allowed in respect of interest on money borrowed for the purposes of the company and for rent or royalties and for ally other payment income tax on which is collected at the source, not being payments of dividends or payments for the distribution of profits, so, however, that no deduction shall be allowed in respect of royalties paid to or interest on money borrowed from, a person having a controlling interest in the company, whether directly or indirectly, or whether solely or jointly with other persons, or in respect of interest paid on permanent loans:
(c)any deduction allowed in respect of the remuneration of any director,
2313
manager or other person concerned in the management of a company, who has a controlling interest in the company, whether directly or indirectly, and whether solely or jointly with any other persons, shall not exceed an amount calculated at the rate of one thousand pounds per annum:
(d)no deduction shall be allowed in respect of any transaction or operation of any nature, which has artificially reduced the amount to be taken as the amount of the profits of the company for the purposes of this Part of this Act:
(e)no deduction on account of wear and tear or renewals or obsolescence or any expenditure of a capital nature for the development of the company or otherwise in respect thereof shall be allowed other than such as may be allowed under the enactments relating to income tax:
(f)no deduction shall be allowed on account of the liability to pay, or the payment of, income tax or corporation profits tax:
(g)a deduction shall be allowed on account of any excess profits duty payable or paid in the United Kingdom for the same accounting period, but in computing profits for the purposes of that duty no deduction shall be allowed on account of the liability to pay or the payment of tax under this Part of this Act:
(h)profits shall include in the case of mutual trading concerns the surplus arising from transactions with members, and in the case of a society registered under the Industrial and Provident Societies Act, 1893, any sums paid by way of bonus, discount or dividend on purchases, shall be treated as trade expenses, and a deduction shall accordingly be allowed in respect thereof.
(i) in the case of a company carrying on the business of life assurance the part of the profits belonging or allocated to or reserved for policy holders or annuitants shall be apportioned between the profits of the company directly liable to assessment to corporation profits tax and the profits not so liable, and a deduction shall be allowed of the amount so apportioned to the profits so liable.

Sir A. FELL: I beg to move, in Subsection (1), to leave out the words "taken to be the actual profits arising in the accounting period, and shall not be."
This is a small point, but its adoption would facilitate the working of the tax. A company's year ends on 31st December, or at some other period, whereas the Government year ends for the purpose of Income Tax on 31st March. It is proposed that there should be two periods in future,
one for this 5 per cent. tax and the other for Income Tax. Surely the whole thing could be done at one and the same time. Income Tax is assessed up to the end of March, and the auditor and the company's officials render their accounts up to that time, and the Surveyor of Income Tax assesses them for Income Tax accordingly. You propose that the thing should be done twice under this Bill, involving extra cost and trouble. The calculations are made on identically the same system; my Amendment would secure that the assessment is done at one time.

Mr. CHAMBERLAIN: The Amendment taken by itself would not be workable, and I do not think it would be acceptable to the persons concerned. The Bill makes the period in respect of which they are charged the period in respect of which the concern makes up its own accounts. That would be more convenient than the hon. Member's proposal. Instead of involving the business concerns in more expense our proposal will involve them in less expense.

Mr. HOLMES: The hon. Member is under a complete misapprehension. He seems to be of the opinion that a Company's accounts for the purpose of making their Income Tax assessments are made up to the end of March. That is not so, at whatever date the Company ends its accounts, whether it is the 31st December or any other date, the average of three preceding years ending on that date is taken as the period, although the national financial year ends on 5th April. The hon. Member's Amendment would not make less but more work.

Sir A. FELL: I do not agree with what has been said, but I do not press the Amendment.

Amendment, by leave, withdrawn.

Mr. HOLMES: I beg to move in Subsection (2, a), after the word "investments" ["arising from investments"], to insert the words "other than investments in securities issued by the British Government since the fourth day of August, nineteen hundred and fourteen."
I do not move this Amendment on sentimental grounds. I am not going to put forward the suggestion that anyone who has invested in War loan during the War should necessarily be exempted from Corporation Tax; but so far as
Excess Profits Duty is concerned, the Inland Revenue have refused to allow any man who invests his surplus capital out of his business in War loan to count that as capital in his business for the purpose of increased capital. A certain percentage has been allowed for increased capital in business, but if a man put £50,000 into War loan he is calculated to have withdrawn that out of his business and to have decreased his capital by £50,000. He is not allowed the increased capital on that for the purpose of the Excess Profits Duty. I do not think the Inland Revenue can now come forward and say that the interest on that War loan, if it is credited to profit and loss account, shall be subject to Corporation Profits Tax. They should be consistent. If they like to say, "We will admit that War loan is capital employed in the business and we will not regard such investment as a withdrawal of capital," well and good: then by all means charge Corporation Profits Tax. Have it one way, with both taxes, and not let the advantage be with the Inland Revenue for Excess Profits Duty and also for Corporation Profits Tax.

Mr. CHAMBERLAIN: I hope the hon. Member will not press this Amendment. My objection is directed not so much against his arguments as against the proposition itself. If the hon. Member looks a little further down the Paper he will see the explanation. There is a similar Amendment in the name of the hon. Member for Altrincham (Major Hamilton) to exempt "a security issued by the British Government or the Government of any British Dominion or Colony, or by a municipal authority in the United Kingdom." In normal times I should have liked to accept the Amendment which the hon. Member has moved, but once you begin there is no stopping. I think that my hon. Friend will see I have good reason for objecting to make a concession which may land me in difficulties.

Amendment negatived.

Sir IVOR PHILIPPS: I beg to move in Sub-section (2, a), after the word "received", to insert the words "directly or indirectly."
It is not quite clear from the words in this paragraph whether the same profits would in every case not be liable to pay Corporation Profits Tax a second time.
There is evidently some difficulty about the matter, because though I put the question to the Chancellor of the Exchequer seven or eight weeks ago I have not yet been able to ascertain whether I am right or the Bill is right. The words I suggest may not be suitable, but I hope that the right hon. Gentleman will consider the matter before report, and if he comes to the conclusion that the same profits may pay a second time, that he will adopt the necessary Amendment.

Mr. CHAMBERLAIN: The hon. and gallant Gentleman is at one with us. I will accept his words subject to reconsideration as to whether they are apt words for the purpose, and if not they can be amended on report.

Amendment agreed to.

Mr. HOLMES: I beg to move, in Subsection (2, b), after the word "royalties" ["for rent or royalties"], to insert the words "or share of profits distributed as bonus under a profit-sharing scheme or otherwise."
It is not necessary to explain the wisdom of allowing such a reduction, because profit-sharing among employés is a method by which industrial unrest may be averted.

Mr. CHAMBERLAIN: All of us have a great deal of sympathy with the object of the hon. Member. We are all glad to see profit-sharing extended as far as we can. Where profiit-sharing is, as it were, a bonus on wages, and not remuneration on shares, I think that the Bill as it stands would be sufficient to exempt it. Where profit-sharing is by allotment of shares it would not, but on the other hand, the employé who is an ordinary investor in shares ought not to have any exemption in respect of relief, and that company ought not to have exemption in respect of the dividend paid on any share merely because it happens to be the share of an employé of the company. I think the hon. Gentleman's words are too wide, but if he will be content to move his Amendment without the words "or otherwise," or allow me to amend the Amendment by leaving out those words, I will accept that Amendment. I would like, however, to reserve liberty between now and the Report stage to see whether the Amendment goes further than either the hon. Member or I wish.

Amendment, by leave, withdrawn.

Further Amendment made: In Subsection (2, b), after the word "royalties" ["for rent or royalties"], to insert the words "or share of profits distributed to employés under a profit-sharing scheme."— [Mr. Holmes. ]

Sir J. D. REES: I beg to move, in Subsection (2, b), after the word "interest" ["paid to or interest"], to insert the words "above the rate of 5 per cent. or the Bank of England rate if higher than 5 per cent."
We have seen the Bank of England rate low, and we wish to see it low again, but the object of Sub-section (2, b) is, I understand, to prevent a director who may have control of a limited company from reducing the amount of Corporation Tax by having the capital in the form of loans instead of shares. This would work very hardly in the case of businesses in which capital is provided by a firm having an interest in the company. Take the very common case where the capital of a company is only sufficient to purchase the property or the factory, and subsequently the company carries on by money lent by such a firm. Why, in such a case, should the loans of money be prejudiced in this respect? Why should they be liable to this surcharge of interest on current account when they lend money bonâ fide, and they lend it for years for the purpose of carrying on the company? Could not the revenue be safeguarded by providing that the rate of interest shall not exceed a certain rate, or shall be subject to the rate charged by the Bank of England? I have endeavoured to provide for both these things in my Amendment. I hope the Chancellor will believe that I am not putting this forward with any desire to alter his Bill, but simply from a desire to do justice to a class of cases with which I am familiar and which is well-known to those in business to be a quite common occurrence, and a perfectly legitimate proceeding. If my right hon. Friend does not see his way to accept this Amendment now I shall be very grateful if he will undertake to consider it before the Report stage of the Bill.

Mr. CHAMBERLAIN: The case that the hon. Member has put is the case of a proprietor or of a man with a controlling interest who, instead of putting more capital into a business, makes a loan.

Sir J. D. REES: Not necessarily a proprietor.

Mr. CHAMBERLAIN: At any rate, a person having a controlling interest. If he put new capital in he would be subject to the tax under my hon. Friend's proposal, but if he lent the money he would not be subject. I do not think we ought to make that distinction, and although I am ready to consider the matter, I cannot hold out any expectations to my hon. Friend.

Sir J. D. REES: The person the right hon. Gentleman has described as having a controlling interest would have no obligation to put further capital into the company, nor does he get anything for his capital excepting the interest upon his capital, and I do not think my right hon. Friend has entirely grasped the intention of my Amendment; but if he will be so kind as to consider it, I shall be happy to supply him with any information which he may desire to have upon the point. In the circumstances, I will now ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Major NALL: I beg to move, in Subsection (2),to leave out paragraph (c).
Under this paragraph as it stands the payment made to a director of a company who has a controlling interest in that company and who is liable to Super-tax will be twice taxed. I will take by way of example an extreme case, that of a managing director of a company with a controlling interest in it, and under his agreement with the company he has a fixed salary of £1,000 a year, with 20 per cent. on the profits. The commission amounts to £12,000 and the total income from all sources to £18,000, on which he would pay in Super-tax £3,450: of that, £2,925 would be in respect of disallowed remuneration. Under this Corporation Profits Tax, £12,000 of this remuneration would be disallowed, and the company would be called upon to pay £600 additional taxation in respect of it. That is purely a double tax. The company is going to pay Corporation Profits Tax on that amount, and the director himself is going to pay Super-tax by reason of his own big income.

Mr. CHAMBERLAIN: I think the Committee will appreciate the fact that we are here dealing only with the remuneration paid to a director who has a controlling interest in a business. Where he
has not a controlling interest, either directly or indirectly, the remuneration paid to him is allowed as a deduction. The hon. and gallant Member gave us an illustration, and I do not know how it struck other people, but it seemed to me that a company which could afford to pay its director so large a sum as he specified could well afford to meet its liability under this tax, and it is obvious that there must be some provision to prevent people with a proprietary or a controlling interest in a company from paying away to themselves as remuneration what would otherwise be the profits of the company, and subject to the Corporation Profits Tax. I think that must be common ground to us all, and that the hon. and gallant Member would not himself, on consideration, think it possible altogether to omit this paragraph. The limit of £1,000 which is fixed is an arbitrary limit, and any such limit must be fixed, I think, fairly generously.

Major NALL: Is it not exceeding the intention of the right hon. Gentleman that this man whom I have given as an illustration is going to pay Super-tax? If that money is not escaping Super-tax, why does he want the company also to pay this Corporation Profits Tax?

Mr. CHAMBERLAIN: The hon. and gallant Member cites one of the arguments which I used in support of this tax which is not applicable to the case he has in mind, but the wider basis of the tax is as applicable to this case as to any other.

Mr. G. BALFOUR: It seems to me that in a very small business £1,000 may be rather too large an amount. Take a small limited company with a total capital of £2,000: the ordinary salary of a manager may not be more than £500 or £600. Is he to be entitled to put himself at once up to the £1,000? Then take the case of a much larger company, where, as is quite common, instead of £1,000 the amount may be £10,000 or £20,000. Is he only to be allowed £1,000? I could cite scores of cases where men could hire themselves out at very large salaries, and, if they left the business, would have to pay £10,000 or £15,000, and we are told that the sum to be allowed is only £1,000. I would like to ask a question in order to clear up a doubt in my mind on this point. Does
the Clause mean one individual, even if the holdings of that individual may be put down in the names of other people, or does it refer perhaps to four, five, or six people who actually own, in their own right, the whole of their share capital between them, with no one director having control of the share holdings? In order to save time I will say what I have to say on an Amendment put down later on the Paper dealing with substitution. I propose, in the next paragraph of this Clause, to leave out a few words and to insert other words which would give to the Exchequer full protection—I think in many respects fuller protection than is provided in paragraph (c). I commend these words to the attention of the Chancellor of the Exchequer, and if, on consideration, he can see his way between now and the Report stage to do something in the direction of accepting these words I should be only too delighted to withdraw this Amendment, when the Chancellor might have an opportunity of considering an Amendment I propose later which I think will give effect to all he has in mind, and to even more ample protection than he suggests.

Mr. HOLMES: There are very many private companies in this country which consist of one or two or three shareholders. They are really private firms. If the Amendment to leave out this Subsection were accepted by the Chancellor of the Exchequer, it would enable the whole of these companies to get out of Corporation Tax altogether, but it is intended—although the right hon. Baronet the Member for the City of London (Sir F. Banbury) tried to persuade us this Corporation Tax was only intended to be a measure to obtain Super-tax from people who were now escaping payment—it is intended to be a new Profits Tax, which will ultimately take the place of the Excess Profits Duty. It is essential that this paragraph should be carried in order to prevent private companies from avoiding altogether the Corporation Tax. I hope the Chancellor of the Exchequer will not accept the Amendment.

Colonel GRETTON: Before we pass from this Clause I am inclined to think that the Chancellor of the Exchequer is right in requiring this Sub-section. At any rate, he wants some protection, even though the particular form is not en-
tirely favourable. I want to ask what the following words mean:
a manager or other person concerned in the management of a company who has a controlling interest in the company, whether directly or indirectly, and whether solely or jointly with any other persons.
Obviously they are, because there may be cases where there is a group of directors, one of whom is actually the managing director, holding only a small number of shares in respect of salary. He may be in association with other directors who are not in receipt of salary, but hold a number of shares. In such a case as this is it intended that the amount paid the managing director should not be allowed to be in excess of £1,000, or, if he should receive a salary of £2,000 or £3,000 because he is on the Board with other directors who take part in the management of the firm, is his salary not be allowed in excess of £1,000? It is clear that it is the intention of the Chancellor of the Exchequer that proprietors of companies should not, by agreement among themselves, pay to their managing directors excessive salaries in order to escape this tax. We all agree that the Chancellor is perfectly right in safeguarding himself from such a proceeding. On the other hand, there are very many cases to which some consideration should be given.

Amendment negatived.

Sir J. D. REES: I beg to move, in Subsection (2 c), to leave out the word one ["one thousand pounds"] and to insert instead thereof the word "three."
I thought that I should save time by supporting the last Amendment instead of moving this one, but I realise that there must be some limitation as to the amount, and therefore I move to leave out "one" thousand and insert "three" thousand. The reason why I do so is that no large business can be run on a remuneration to the manager or managing director of only £1,000. Under this Clause, if the directors who control the business have associated with them other directors who do not control the business, they would be surcharged on all the remuneration in excess of £1,000, which it had been necessary to pay to the directors who did not control the business in order to retain their services. That seems to me to be a distinct flaw in the Bill. Suppose that a company has a capital of £1,000,000—that
is not a very tremendous company—£1,000 is a mere trifle to consider in respect of remuneration for the manager or the managing director. It is true that there could be an appeal to the Special Commissioners as to the reasonableness of the remuneration which may be in excess of £1,000, but the taxpayer might hesitate before placing himself in the hands of Somerset House in this question. I submit to the Chancellor of the Exchequer that the figure of £1,000 is an altogether impossible one to allow to those dealing with the business of a company in respect of remuneration of the manager or managing director. To a business or company of any importance the figure is a mere bagatelle. These managing directors are not like officials who clear their desks every day, leave their work and go off home, and have no more to say on the matter. These managers have to put in every ounce of their ability to make the particular business concern a success—and they do make it a success, which no official could. If the Chancellor of the Exchequer thinks £3,000 too large a figure, let us split the difference and make the figure £2,000, although I consider that that figure is an inconvenient one.

Mr. CHAMBERLAIN: I confess I was rather surprised to hear my hon. Friend suggest that officials lead an indolent life.

Sir J. D. REES: No, I did not say that.

Mr. CHAMBERLAIN: My hon. Friend used words to that effect.

Sir J. D. REES: I am sorry, but I really cannot let that pass. I was an official myself for a great part of my life. I meant to point out the difference between an official and a managing director or a manager of a large business concern. I meant no disrespect to the official, for whom I have the profoundest regard.

Mr. CHAMBERLAIN: I am very relieved to hear my hon. Friend's explanation, because, from what I understood him to say, I despaired, under those circumstances, of carrying conviction to his mind. But if my hon. Friend bears in mind the discussion on the last Amendment where objection was taken to the fact that £1,000 would be in many cases too large a sum, he will see the difficulty, and, indeed, the impossibility, of forthwith multiplying that
sum by three. It is, I think, better to have a fixed arbitrary sum—it would be more satisfactory to the people concerned and to the Committee—than if I were to propose that it should be left in the discretion of the Inland Revenue authorities to allow such a sum as might be thought proper in any individual case. Had I done so I feel sure I should have been met with the criticism that I had been making them an arbitrary authority, and making them, and not the House of Commons, the really definite taxing authority, and I hope under the circumstances that my hon. Friends will not press this.

Amendment negatived.

Colonel GRETTON: I beg to move at the end of Sub-section (2, c), to add the words:
Provided that a deduction shall be allowed in respect of the full amount of such remuneration where it is payable to a particular person by virtue of a specific provision relating to such person contained in the articles of association of the company, or by the terms of an agreement entered into between the company and such person before the passing of this Act.
This Amendment attempts to meet the objection which has been raised with regard to the Amendment of the hon. Member for North East Derbyshire (Mr. Holmes), and the objection which has been raised by the hon. Member for East Nottingham (Sir J. D. Rees). It deals with the actual remuneration. I am not altogether satisfied that the Bill limits the remuneration to an agreement made before the passing of this Bill, and I do not see why there should not be some provision for agreements made after the passing of the Bill. The Clause as it stands is vague and difficult of interpretation. I do not think the right hon. Gentleman can interpret it himself, and I ask for some explanation. Salaries and remuneration have been increased owing to War conditions, and they are a heavy charge; they are a fair working expense, part of the machinery for carrying on the business of the company; and I ask that this Clause may be. accepted subject to any Amendment found to be necessary on the Report stage.

Mr. CHAMBERLAIN: I understand that what my hon. Friend wants to provide for is the case, not of the proprietor-director, but of the employé-director who
happens to be a shareholder who has a few shares. If that is the case he wants to cover, that is covered already by the Bill, and his Amendment is not required. We cannot allow the real proprietor to vote to himself remuneration what under any other circumstances would clearly be dividend, but the case which my hon. Friend put to me a moment ago, and to which he is now addressing himself, is the case of the employé-director. His case will not be eliminated from consideration by reason of the fact that he holds a few qualifying shares in order to enable him to hold the post of director.

Colonel GRETTON: My difficulty is with the wording of the previous Subsection. That refers to a proprietor who is interested "whether directly or indirectly and whether solely or jointly with any other persons." Those words are very wide and sweeping, because the manager who is an employé is associated with and holds shares jointly with the persons who control. That is the case we want to provide for, and I am quite certain the right hon. Gentleman means the same thing, but the words of his previous Sub-section sweep in, on any ordinary interpretation, the managing director who is an employé of the company, because he is jointly with other persons associated with the controlling interest.

Mr. CHAMBERLAIN: I think we are at one. I have had the words looked at again, and I am advised that they would not have the effect my hon. Friend fears. What I want to guard against is the case of three or four proprietors of a business. Under the Clause an allowance may be made in respect of each of them of £1,000. But because there are three or four of them they must not be allowed to divide up all the profits and so to take away all the profits in the shape of remuneration. My hon. Friend does not want them to do that. He and I want the same cases to have exemption and the same cases to be included within the scope of the Subsection, and I believe my words are effective for our common purpose, but I will have them looked into again to make sure.

Mr. HOLMES: I assume the Chancellor will carry out the same procedure with regard to the Corporation Profits Tax as his officials have carried out in regard to the Excess Profits Duty. That
is, where there are several proprietors, one of them is the working proprietor, his remuneration will be allowed in full as a deduction, and the deduction will not be allowed in the case of the others. Take, the case of four men who put up £1,000 each for a business, making a capital of £4,000, and where one of them runs the business, the others being sleeping partners. His remuneration will be allowed as a deduction, but no deduction will be allowed in the case of the others. This has been done for Excess Profits Duty and I presume a similar practice will be carried out in the case of the Corporation Profits Tax.

Mr. TERRELL: I hope the Chancellor of the Exchequer will see his way to meet this case, because there is a good deal of dissatisfaction at the way the question of the managing director's remuneration has been handled in the case of the Excess Profits Duty. We think that where there is an existing agreement fixing the rate of the remuneration, or where it is settled by the articles of association of a company formed before the passing of this Bill, that the Treasury should honour such arrangement which has been entered into, because obviously there could be no collusion in such a case to defeat the Revenue. The £1,000 which it is sought to fix as the limit may be far too much in some cases, and in the case of big companies may be far too small. I would impress upop my right hon. Friend that it is no good saying "a director with a controlling interest," because he can always divest himself of his share interest. He can always defeat the Revenue by getting rid of the shares. You do not grant a loophole of escape. I would suggest that it is a much fairer way to accept the arrangement outlined in the Amendment now before the Committee.

Mr. G. BALFOUR: Take the case of four or five directors in a company all owning substantial blocks of shares, perhaps in the aggregate a majority, but that the whole of the directors are drawing salaries no higher than would have been paid to replace men in a similar service. Would the Chancellor see that protection is given in a case like that. Speaking earlier in the evening, I mentioned the case of a man drawing £10,000 or £15,000. If he dropped out you would have to pay that remuneration to replace
his services. Can the Chancellor of the Exchequer see his way to meet such a contingency?

Mr. REMER: I think the Chancellor has overlooked the important words in this Amendment, "before the passing of this Act." I fail to see how there can be any collusion or any evadement of the tax through the operation of anyone who has even a controlling interest in a company with these words in. The effect of these words seems to me to be that anyone who has a controlling interest in a concern would have to have an agreement which was in existence before the passing of this Act stamped before that date, which would have the effect that no increase after the passing of the Act would be valid. Therefore, I think that with these important words in the Chancellor could have no fear that anyone can avoid this tax or get out of the liability placed upon and, therefore, that he can easily accept the words in the Amendment, which is framed solely to assist the Chancellor of the Exchequer and to avoid any evadement.

Mr. CHAMBERLAIN: I recall a discussion we had not many hours ago, in which vehement objection was taken to a provision dealing with the distinction between Corporations formed before the passing of the Bill and those formed after, and Corporations which might have taken certain action before the passing of the Bill and those which might take the same action hereafter. There was very strong objection on both sides, and I agreed to reconsider it. In the absence of those-who vehemently objected before, hon. Gentlemen are asking me to introduce a fresh condition. If I do so, I would only jump from the frying pan into the fire.

Mr. TERRELL: What we ask is. that agreements come to before the passing of the Bill should be honoured. After the passing of the Bill you have the knowledge of the Bill, and you can make your arrangements accordingly, but agreements arrived at before the passing of the Bill should be honoured. Agreements of that sort cannot be agreements, which are intended to defeat the revenue.

Amendment negatived.

Mr. G. BALFOUR: I beg to move at the end of Sub-section (2, e), to add the-words "or Excess Profits Duty, whichever be the greater."
The object of this Amendment is to allow a deduction for depreciation to be made under the most appropriate account. Obsolescence of Income Tax is provided for under the Income Tax Clauses, and there is provision for obsolescence under the Excess Profits provisions of the Finance Act, 1915. It seems to me incontestable that whichever is the most appropriate allowance should be made. I do not think there can be any injustice to anybody in giving right and proper provision for obsolescence and depreciation, and I think it should be provided for in the new duties.

Mr. CHAMBERLAIN: I think I am able to meet the suggestion of my hon. Friend, and I will accept the Amendment.

Amendment agreed to.

Mr. HOLMES: I beg to move, at the end of Sub-section (2, f), to insert the words, "except that interest, dividends, and other income arising from investments, received after deduction of Income Tax, shall be included in the profits at the net amount."
A company that has investments receives its dividends after deduction of tax. If it is entitled to a dividend of £100, it actually receives £70, the tax of 6s. in the £ having been deducted, and it credits its profit and loss account with £70. Does the Chancellor of the Exchequer intend by this paragraph, in which he says that no deduction shall be allowed because of the liability to pay Income Tax, that when the company is assessed for Corporation Tax the £70 received has to be written up to £100? My Amendment is that, if only £70 is received, Corporation Tax is only to be charged on that amount.

Mr. CHAMBERLAIN: My view is that the Corporation Tax is a deduction when you are assessing for Income Tax, but I cannot make both taxes a deduction when you are assessing for either. The hon. Member proposes to make it work both ways to the disadvantage of the Exchequer. The result would be that a block of investments would be subject neither to the full Corporation Tax nor to the full Income Tax. My view is that the company should pay on the interest received, without deduction for Income Tax.

1.0 A.M.

Mr. HOLMES: This will mean a tremendous amount of adjustment in the
accounts of companies. The Chancellor of the Exchequer says they would not be liable for full Income Tax or Corporation Tax. They would be liable under my Amendment, because they have paid Income Tax before they receive the money. This will mean that all income from investments will have to be written up. That will make it very complicated for the authorities and for accountants and firms if the Chancellor refuses my Amendment. I think it will be much simpler and make very little difference to the Exchequer if he agrees that the Corporation Profits Tax should only be charged on the net dividends received from investments.

Mr. CHAMBERLAIN: I will look further into it. My mind is not working as it should be at this time of night. I could not accept it at this moment without looking further into it.

Mr. G. BALFOUR: The Chancellor is thinking of the companies which have to pay Corporation Tax, while my hon. Friend is referring to investments held by a company from which Income Tax is already deducted. Surely it is not fair for the Chancellor of the Exchequer to charge Corporation Tax on the net income of the investments on which Income Tax has been paid. I am sure that it is not the intention of the Chancellor to charge Corporation Tax on an income on which Income Tax has already been paid by a third party. It is necessary to put something in to protect these people. I hope the Chancellor will be able to meet this on Report stage, or else it should be pressed now. It certainly seems an extraordinary proposal to charge Corporation Tax on an Income Tax already paid by a third party.

Mr. CHAMBERLAIN: I will look into it if the hon. Gentleman will give me time.

Amendment, by leave, withdrawn.

Major WHELER: I beg to move, in Sub-section (2, g), after the word "duty" ["duty payable"], to insert the words "any mineral rights duty and excess mineral rights duty."
The Clause as it stands allows the deduction of Excess Profits Duty, but it does not allow the deduction of Mineral Rights Duty and Excess Mineral Rights Duty.

Mr. CHAMBERLAIN: I agree to the Amendment.

Amendment agreed to.

Mr. HOLMES: I beg to move, in Subsection (2, g), after the word "Kingdom" ["United Kingdom"], to insert the words "and for any sum payable or paid on account of Excess Profits Duty or similar duty imposed in any country outside the United Kingdom."
This has been allowed for Excess Profits Duty, and I suggest it should be allowed for Corporation Tax.

Mr. CHAMBERLAIN: Yes; I accept that, if the hon. Member will allow me to consider the exact wording.

Amendment agreed to.

Mr. G. BALFOUR: I wish to move, at the end of Sub-section (2, g), to insert the words
in the case of a company either in its own name or that of a nominee owning the whole of the ordinary capital of any other company, or so much of that capital as under the general law a single shareholder can legally own, the two companies shall not be separately assessed, but the assessment shall be made on the first named company in respect of the profits of both companies as if that other company were a branch of the first named company;
Provided that for the purpose of the limitation of the amount of tax payable under Sub-section (1), paragraph (b), of the Section of this Act the marginal note to which is 'Charge of corporation tax' deductions shall be made in respect of the matters referred to in that Sub-section in relation to the profits of both companies except as regards payments by that other company to the first named company.

Mr. CHAMBERLAIN: I think my hon. Friend's object is the same as that of the Amendment standing in the name of the hon. Member for North-East Derbyshire (Mr. Holmes), and I am ready to accept the Amendment in the name of the hon. Member for Derbyshire. I think it is the same thing. It is as broad as it is long as to the Exchequer and the taxpayer in general. I should only accept it on condition that I should have liberty, as in other cases, to consider the exact wording.

Mr. BALFOUR: I agree with the suggestion of the Chancellor of the Exchequer, but I suggest that the wording in my case has been more carefully studied to protect the Exchequer than that of the Member for North-East
Derbyshire. I am prepared to withdraw my Amendment.

The CHAIRMAN: I have not put it before the Committee. I will put the other before the Committee later on.

Captain WEDGWOOD BENN: On a point of Order, The Amendments down in the name of my hon. Friends and myself deal with the matter disposed of in the present Clause. Will you indicate whether you will take any Amendments dealing with the modification of paragraph (h)? I mention particularly the Amendment of the hon. Member for North-East Derbyshire on Clause 45, Sub-section (2, h), to leave out from "1893" to the end of the paragraph, and insert the words "only profits-arising from transactions with nonmembers."

The CHAIRMAN: No. In view of the decision earlier in the evening, I do not propose to call those Amendments, the Committee having decided the question. I conferred with some hon. Members and they thought it would be as well to leave any decision on that question to the Report stage.

Mr. BARRAND: I beg to move, in Subsection (2, i), to leave out the words "or reserved for," and to insert instead thereof the words "reserved for or expended on behalf of."
The object of the Amendment is to make quite clear what I believe is the intention of the Chancellor of the Exchequer, that that portion of the surplus of an insurance fund which belongs to the policy-holders shall be freed from the Corporation Tax.

Mr. CHAMBERLAIN: I accept that Amendment.

Amendment agreed to.

Mr. HOLMES: I beg to move, at the end of Sub-section (2, i), to add a new paragraph:
(j) any sum received by way of repayment of Excess Profits Duty in respect of a previous accounting period under Subsection (3) of Section thirty-eight of the Finance (No. 2) Act, 1915, and subsequent Amendments thereof shall be excluded from the profits taxable.
The Committee will know that where the company has already paid Excess Profits, Duty and its profits fall in a subsequent accounting period below its pre-War
profits or percentage standard it can obtain repayment. It seems obvious to me that if money is received during the current year in repayment of Excess Profits Duty of last year it should not be considered a profit of the current year on which this tax is assessed. Therefore, this Amendment is intended to exclude from the proviso any repayment of Excess Profits Duty in respect of previous years.

Amendment agreed to.

Mr. H0LMES: I beg to move, in Sub-section (2), after the words last inserted, to add the following new paragraph:
(k) where any company, either in its own name or that of a nominee, owns the whole of the ordinary capital of any other company or so much of that capital as under the general law a single shareholder can legally hold, the provisions of this Part of this Act shall apply as if that other company were a branch of the first-named company and the profits of the two companies shall not be separately assessed.

Mr. G. BALFOUR: I should like to call the attention of the Chancellor of the Exchequer formally to the words in the Amendment which I proposed which provides that, where you have fixed charges in the underlying company quite apart from fixed charges paid out by the holding company, that they are not duplicated.

The CHAIRMAN: I understood that the hon. Member for North-East Derbyshire (Mr. Holmes) was dealing with the middle one of the three paragraphs which stand in his name on the Order Paper—namely, paragraph (k).

Mr. BALFOUR: My Amendment was withdrawn on the understanding that the hon. Member for North-East Derbyshire was moving the insertion of paragraph (k)

Mr. CHAMBERLAIN: Would the two hon. Gentlemen be agreed to leave this over until the Report stage and allow me to bring up words on the Report stage. I would prefer to bring up my own words.

Mr. HOLMES: I want to ask the Chancellor of the Exchequer just one thing. He has been good enough to ask me, in four cases at any rate, to defer them until the Report stage. Does he ask me to put my Amendment down again on Report, or will he himself put down Amendments?

Mr. CHAMBERLAIN: Where it is a question of finding words, I will certainly
put down an Amendment, but where I have undertaken to consider matters between now and Report, without distinctly undertaking to propose Amendments, if I am unable to meet the hon. Gentleman to whom I have been replying, I shall not have any Amendment to propose. In such a case as this, I shall put down words myself.

Amendment, by leave, withdrawn.

Mr. HOLMES: I beg to move, in Subsection (2), after the words last inserted, to add a new paragraph:
(l) In the case of any contract extending beyond one accounting period from the date of its commencement to the completion thereof, and only partially performed in any accounting period, there shall (unless the Commissioners of Inland Revenue owing to any special circumstances otherwise direct) be attributed to each of the accounting periods in which such contract was partially performed such proportion of the entire profits or loss, or estimated profits or loss, in respect of the complete performance of the contract as shall be properly attributable to such accounting periods respectively, having regard to the extent to which the contract was performed in such periods.
This Amendment is taken, word for word, from the Finance Act, 1915, with regard to excess profits.

Mr. CHAMBERLAIN: I am prepared to accept the Amendment.

Amendment agreed to.

Mr. BARRAND: I beg to move, in Subsection (2), after the words last inserted, to add the words
Where a company carries on life assurance business in conjunction with assurance business of any other class, the life assurance business of the company shall, for the purposes of apportionment under this paragraph and for no other purpose, be treated as if it were a separate business carried on by a separate company.

Amendment agreed to.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Lieut.-Colonel Sir JOHN HOPE: I should like to ask the Chancellor of the Exchequer whether he would be prepared to give a chance to the co-operative societies to put forward some other means of tax other than the Corporation Tax? Would he favourably consider on Report the question of omitting them for the Corporation Tax?

Mr. N. MACLEAN: May I point out to the Chancellor of the Exchequer a diffi-
culty with regard to some of the wholesale and retail co-operative societies. These societies are generally founded upon £1 shares paid by the members. These amounts are invested in the wholesale societies, and each society must take out a share for each member that it has in the retail society and the wholesale society. According to the wording of this Clause this will be looked upon as an investment, and under the Clause a retail co-operative society will be taxed upon the profits made, and then the wholesale societies will be taxed upon the profits they make, partly from the capital from the retail societies. This is purely a case of capital invested by a parent company in a subsidiary company, and if the Chancellor of the Exchequer is going to tax the wholesale societies and also the profits of the retail societies he will be taxing them twice over. Is that his intention?

Mr. CHAMBERLAIN: I am sorry that I cannot answer that question. I am grateful to the hon. Member for raising it. I will inquire into it, and communicate by letter with him, if he will allow me. With regard to the question of the hon. Member for Midlothian (Sir John Hope) he will readily see the difficulty of introducing a new tax on Report—a tax not covered by Resolutions already approved by the House. I am quite ready to consider proposals from co-operative societies for making a similar contribution in lieu of this particular tax, but I cannot pledge myself to be able to introduce it on Report, because that might mean going back to the elementary stages of the Budget, which I think he will agree is impossible.

Captain W. BENN: I would point out that we are rather at a disadvantage as to putting words down ourselves, and the words that may be put down by the right hon. Gentleman. If an Amendment is put down by the Government it is an Amendment which is sure to be selected. I would urge the Chancellor of the Exchequer to bear this in mind with reference to any concessions he may make on this important matter, because we may not be able to achieve what we mean owing to the procedure of this House.

Mr. N. MACLEAN: Why not consult the co-operative societies?

Mr. CHAMBERLAIN: Of course, I have seen them, as the hon. Gentleman
no doubt knows, but they made no suggestion, but only gave their reasons for objecting to my proposal. I am quite ready to examine any proposal they may make, but as to the proposal of the hon. Member he will see the extreme difficulty of introducing a new tax at this time, because you have to go back to the Report of the Resolutions, which may involve two or three extra days' work upon the Finance Bill.

Sir J. HOPE: Will the right hon. Gentleman see the co-operative societies again?

Mr. CHAMBERLAIN: There again I shall be very hard pressed. I shall have a great deal of work on considering the points brought before me, and I cannot undertake to see deputations. If the societies have any proposals to make, I shall be glad to see those proposals.

Captain W. BENN: Would it be possible to mitigate the incidence of this tax on the co-operative societies? Would the right hon. Gentleman be willing to put down words on the Paper in order to ensure that on the Report stage?

Mr. CHAMBERLAIN: If I can find words to secure unity where there is now division, I will do so.

CLAUSE 46.—(Determination, of accounting period.)

(1) For the purposes of the tax under this Part of this Act the accounting period shall be a period of twelve months ending on the date up to which the accounts of the company are usually made up:

Provided that where the accounts of a company have been made up for a period greater or less than twelve months, or where the accounts have not been made up or where the company has ceased to carry on business or has transferred its business or part of its business to some other person, the accounting period shall be such period not exceeding twelve months as the Commissioners of Inland Revenue may determine.

(2) In the case of a company which was in existence before the beginning of the first day of January, nineteen hundred and twenty, the first accounting period for the purpose of this Part of this Act shall be the first accounting period of the company which ends after that date:

Provided that where part of an accounting period is after and part before the beginning of the first day of January, nine-
teen hundred and twenty, the total profits of the accounting period shall be apportioned between the period up to and the period beginning on that date in proportion to the respective lengths of those periods, and Corporation Profits Tax shall be charged only on so much of the profits as are apportioned to the period beginning on that date, and that period shall be deemed to be an accounting period for the purpose of this Part of this Act.

(3)The Commissioners of Inland Revenue may if they think fit divide any periods for which accounts have been made up, and may make such apportionments or aggregations of profits and losses as may be necessary for the purpose of estimating the profits or losses for the yearly accounting period, or for any, other purpose of this Part of this Act.

Any apportionment under this Sub-section shall be made in proportion to the number of months or fractions of months in the respective periods representing the divided periods.

Mr. HOLMES: I beg to move, in Subsection (1), to leave out the words
A period of twelve months ending in the date up to which the accounts of the company are usually made up:
Provided that where the accounts of a company have been made up for a period greater or less than twelve months, or where the accounts have not been made up or where the company has ceased to carry on business or has transferred its business or part of its business to some other person, the accounting period shall be such period not exceeding twelve months as the Commissioners of Inland Revenue may determine.
and to insert instead thereof the words
taken to be the period for which the accounts of the trade or business have been made up, and where the accounts of a company have not been made up for a definite period, or for the period for which they have been usually made up, or a year or more has elapsed without accounts being made up, or where the company has ceased to carry on business or has transferred its business or part of its business to some other person, shall be taken to be such period not exceeding twelve months as the Commissioners of Inland Revenue may determine.
I suggest to the Chancellor of the Exchequer that he should do the same in regard to the Corporation Profits Tax as to the Excess Profits Tax, and not wait until the end of the year and then add two or more accounts together, but he should assess the Corporation Profits Tax at the same time as the Excess Profits Duty is assessed, so that the two things can be settled at the same time. There is no need to wait until the end of the year in order to deal with the matter.

Mr. BALDWIN: If the Excess Profits Duty were a recurrent tax there might be some substance in the suggestion of my hon. Friend, but, in the circumstances of the case, I cannot see any advantage in it. Our experience is, that although the practice to which the hon. Member has alluded is not uncommon among companies which pay Excess Profits Duty, there has been a desire manifested on the part of these to make their returns for a shorter period—to have a return made for the whole twelve months. I think, from my experience, that I should much prefer such a period. For the purposes of a tax of this kind, which has many points of resemblance to Income Tax, I confess that I think the most convenient practice will be to take the longer period.

Amendment negatived.

Mr. HOLMES: I beg to move, at the end of the Clause, to add a new Subsection:
(4)Where a company proves that in any accounting period which ended after the first day of January, nineteen hundred and twenty, it has sustained a loss, it shall be entitled to repayment of such amount paid by it as Corporation Profits Tax in respect of any previous accounting period or to set off against any Corporation Tax payable by it in respect of any succeeding accounting period such an amount as will make the total amount of Corporation Profits Tax paid by it during the whole period accord with its profits during that period.
This is to provide that where a company pay the tax for one accounting period for one year and in the following year make a loss they shall be entitled to recover the tax to that extent in just the same way as they have been allowed to recover the Excess Profits Duty. We will say that a company makes £5,000 in one year and pays £250 in Corporation Tax and that in the next year it makes a loss of £5,000, so that in the two years together it has made no profit, then my Amendment would enable it to recover the £250 it paid in the first year. It was recognised that this was a fair thing in connection with the Excess Profits Duty, and I suggest it is fair with regard to, the Corporation Profits Tax.

Mr. CHAMBERLAIN: I really think my hon. Friend is inclined to press too far the analogy of the Excess Profits Duty, and that we are not called upon to introduce into a tax at a low rate like this, and of a continuing or per-
manent character, all the provisions which were introduced into a tax levied at the high rate at which the Excess Profits Duty has been put and under the special circumstances of the War period. As the hon. Member probably knows, the Income Tax Commission has given some attention to analogous cases and has suggested some change in the law, and therefore I think if he introduces this principle at all into the Corporation Profits Tax it should be on the analogy of the Income Tax and follow anything we may do there rather than that we should prejudge the issue by acting in this case.

Amendment negatived.

Clause ordered to stand part of the Bill.

CLAUSE 47.—(Returns for purpose of Part V and penalty for fictitious transactions.)

(1)The Commissioners of Inland Revenue may, for the purposes of this Part of this Act, require the secretary of a company or other officer (by whatever name called) performing the duties of secretary of the company, or, in the case of a foreign company, any person being an agent, manager, factor, or representative (by whatsoever name called) of the company, to furnish them within two months after the requirement for the return is made with returns of the profits of the company during any accounting period and such other particulars in connection therewith as the Commissioners (may require).

(2)Where the profits of any company are chargeable to Corporation Profits Tax under this Part of this Act it shall be the duty of every person who may be required to make a return under this Section to give notice that the profits are so chargeable to the Commissioners of Inland Revenue within six months of the end of the period for which the accounts of the company are made up, unless he has been previously required by the Commissioners to make a return under this Section, and it shall be the duty of the liquidator of every company which is being wound up at the time of the commencement of this Act or is wound up after the commencement of this Act, and is chargeable to Corporation Profits Tax, to give notice of the fact to the Commissioners of Inland Revenue.

(3)If any person fails to furnish a proper return in accordance with the foregoing provisions of this Section or to comply with any requirement of the Commissioners under this Section, or to give any notice required by this Section, he shall be liable on summary conviction to a fine not exceeding one hundred pounds and to a further fine not
exceeding ten pounds a day for every day during which the offence continues after conviction therefor.

(4)A company shall not, for the purpose of avoiding the payment of Corporation Profits Tax, enter into or carry out any fictitious or artificial transaction.

If any company acts in contravention of this provision, the company, and in the case of a foreign company the agents, manager, factor, or other representative of the company, shall be liable on summary conviction to a fine not exceeding five hundred pounds.

Mr. G. BALFOUR: I beg to move, in Sub-section (1), to leave out the words "may require" ["as the Commissioners may require"], and to insert instead thereof the words "would be entitled to require under the existing Income Tax Acts".
The object is simply to limit the obligations on secretaries and other officials to what would be required under the Income Tax Acts, and I cannot imagine that there should be any objection to that. It naturally follows that the next two Amendments on the Paper would be dealt with by accepting this Amendment.

Mr. CHAMBERLAIN: The words put down on the Paper are the same as the provisions contained in the Excess Profits Duty, but, as I said just now, I do not think that is conclusive proof that we ought to adopt them. I do not think there has been any general complaint of the way in which the Commissioners have exercised their powers under that Act, and the words it is proposed to leave out enable the Commissioners to exercise some check in cases of suspected fraud or evasion, which I am sure my hon. Friend would not wish to protect. The Amendment takes away from the Commissioners the power to require any particulars or other necessary information, for the Commissioners of Inland Revenue have under the Income Tax Acts no statutory power to require information of any similar kind. All such powers, which are limited, are vested in the appellate body, the General Commissioners or the Special Commissioners. The Commissioners of Inland Revenue are not an assessing body for Income Tax purposes. I think on the merits these powers really are required, and they involve no hardship for honest people, and they may prevent cases of fraud.

Mr. BALFOUR: I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

CLAUSE 48.—(Supplementary provisions as to Corporation Profits Tax.)

(1)Corporation Profits Tax shall be assessed by the Commissioners of Inland Revenue and shall be payable on the expiration of two months from the date on which it is assessed.

(2)Where a company on whose profits the tax is to be assessed is a British company the tax shall be assessed on the company, and where the company on whose profits the tax is to be assessed is a foreign company the tax shall be assessed on the company in the name of any agent, manager, factor or other representative of the company.

(3)Where a company is in the course of being wound up, the liquidator, receiver or other person having the control of the assets of the company shall not distribute the same until provision has been made to the satisfaction of the Commissioner of Inland Revenue for the payment of any Corporation Profits Tax for which the company may be liable.

Any liquidator, receiver or such other person as aforesaid who distributes the assets of the company without making such provision as aforesaid shall be liable to a fine not exceeding three times the amount of any Corporation Profits Tax which may be payable.

(4)An assessment (including an additional assessment) may be made by the Commissioners of Inland Revenue at any time within six years after the end of the accounting period in respect of the profits on which the assessment is made, and in the absence of a satisfactory return or other information on which to make an assessment the Commissioners may make an assessment according to the best of their judgment.

(5)The amount of Corporation Profits Tax payable shall be recoverable as a debt due to His Majesty from the company on which it is assessed, or in the case of a foreign company from the person in whose name the company is chargeable, and where the amount of tax payable is less than fifty pounds the tax shall, without prejudice to any other remedy, be recoverable summarily as a civil debt.

(6)Any company which is dissatisfied with the amount of any assessment made upon it by the Commissioners of Inland Revenue under this Part of this Act may appeal to the Commissioners for the general purposes of Income Tax acting for the division in which the company is assessed for Income Tax or to the Commissioners for the special purposes of the Income Tax Acts, and those Commissioners shall have power on any appeal, if they think fit, to summon witnesses and examine them upon oath.

The power under Section one hundred and ninety-six of the Income Tax Act, 1918, to require an appeal in Ireland to the Special Commissioners to be reheard by the County Court Judge, or Chairman of Quarter Sessions, or Recorder, shall apply to an appeal in Ireland under this provision.

Section one hundred and forty-nine of the Income Tax Act, 1918 (which relates to the statement of a case on a point of law), shall apply with the necessary modifications in the case of any appeal to the General or Special Commissioners under this Section, or of the rehearing of any such appeal in Ireland, as it applies in the case of appeals to the General or Special Commissioners under the Income Tax Acts.

(7)The amount of any Corporation Profits Tax assessed by the Commissioners of Inland Revenue shall be payable notwithstanding any appeal under this Section, except in cases where the Commissioners direct to the contrary, but the Commissioners shall make such repayments, if any, as are necessary to give effect to any decision on appeal as soon as possible after the decision has been given.

(8)The Commissioners of Inland Revenue may make Regulations with respect to the assessment and collection of the Corporation Profits Tax and the hearing of appeals under this Section, and may by those Regulations apply and adapt any enactments relating to the assessment and collection of Income Tax, or the hearing of appeals as to Income Tax by the General or Special Commissioners, which do not otherwise apply.

(9)All Commissioners and other persons employed for any purpose in connection with the assessment or collection of Corporation Profits Tax shall be subject to the same obligations as to secrecy with respect to Corporation Profits Tax as those persons are subject to with respect to Income Tax, and any oath taken by any such person as to secrecy with respect to Income Tax shall be deemed to extend also to secrecy with respect to Corporation Profits Tax.

Colonel GRETTON: I beg to move, in Sub-section (1), to leave out the words "by the Commissioners of Inland Revenue," and to insert instead thereof the words " in the same manner in all respects as Income Tax under Schedule D."
The Corporation Tax is to be assessed in the same manner as the Income Tax, but I think that these particular words must have slipped in without their meaning having been recognised. This new tax is to be assessed by the Commissioners of Inland Revenue. What I propose is that the tax should be assessed in the same manner in all respects as the Income Tax under Schedule D. That reserves the right of local appeal, and the right of ultimate appeal which all payers of Income Tax possess. Proposals have
been made that the Commissioners of Inland Revenue shall be the authorities to assess the tax and collect it. The assessment and payment of the tax are matters of very great importance. I suggest that it should stand on all fours with the Income Tax, and if a change is considered wise after careful investigation, that this new Corporation Tax should go on the same lines as the Income Tax. Anyway, I think this matter should not be inserted here, and it should not be settled by a casual Clause. I urge the right hon. Gentleman to accept my Amendment or something equivalent to it, and not raise great and far-reaching problems which will affect the whole system of Income Tax assessment as well as assessment for this new tax.

Mr. CHAMBERLAIN: I certainly do not want to open up at this point or at this hour of the night the whole question of assessing Income Tax, but this has not been done by me, but by my hon. Friend, who treats the Income Tax as if it was the only analogy to this tax, and as if everything done in connection with this tax was to be done by the Income Tax Commissioners in connection with other taxes. I would appeal to other pre cedents. There are the Estate Duties, the Excess Profits Duty, and the Supertax. The procedure of the Income Tax applies to all of them, and the procedure is similar to that which we propose to apply here in the case of the Corporation Tax. If a taxpayer feels himself aggrieved by the assessment which the Board makes, he has the right of appeal either to the General Commissioners of Income Tax or to the Special Commissioners of Income Tax. The option which he enjoys is exactly the same as the option which he has in connection with assessment for Income Tax under Schedule D. Accordingly, without in the least prejudging the question raised by the Royal Commission on Income Tax, and without endeavouring to settle or to discuss what we should do in connection with Income Tax, I ask the Committee to deal with this tax as with Estate Duty or Super-tax, and leave the assessment to the Board, which gives the taxpayer, if aggrieved, the right of appeal.

Colonel GRETTON: The right hon. Gentleman is not inclined to accept the views I wish to press upon him. In asking
leave to withdraw this Amendment, I must reserve to myself the right to raise this matter again on Report stage and press it on the attention of the whole House.

Amendment, by leave, withdrawn.

Colonel GRETTON: I beg to move, in Sub-section (4), to leave out the words "six years" ["within six years"] and to insert instead thereof the words "one year."
This Sub-section gives the Commissioners of Inland Revenue the right to make an assessment at any time within six years. Such a proposal is entirely new. The usual provision for Income Tax allowed an additional assessment to be made any time within a few months. This was altered subsequently to allow an additional assessment to be made within a period of three years. There has been a great deal of evidence taken by the Royal Commission with regard to this period of three years, and I think I am right in saying that it was agreed by the evidence submitted that the period of three years was too long and led to very great inconvenience. In this new proposal an additional assessment may be made for the new Corporation Tax for as long a period after the original assessment as six years. Really that is quite wrong, and I propose that the period of six years should be reduced to one year. That period is surely quite long enough. Surely the right hon. Gentleman will be able to meet me on this matter. If he thinks that the period of one year, which I suggest, is too short he will at any rate agree that the period of six years is far too long, and he has no justification whatever to exceed the three years under the existing arrangement.

Mr. CHAMBERLAIN: The evidence given before the Income Tax Commission has produced a different impression on my hon. Friend's mind from that produced on ours. The Commission recommend that the time in which it should be competent to make an additional assessment should be any time within six years after the end of the year's assessment, and in cases of fraud that there should be no time limit for the recovery of the tax. Well, that is the answer why we took this. It is following upon the analogy of that recommendation that we have made our proposals in this Bill. I am willing
to meet my hon. Friends. Certainly one year would be too short, but I will take the three years if my hon. Friend will withdraw his Amendment and substitute three years, and I or my successors, when the Income Tax Clause is changed, will bring this proposal with regard to Corporation Tax under review.

Colonel GRETTON: I accept that, and will withdraw my Amendment and substitute three years.

Amendment, by leave, withdrawn.

Amendment made: In Sub-section (4) leave out the word "six," and insert instead thereof the word "three."— [Colonel Gretton. ]

Colonel GRETTON: I beg to move, "to leave out Sub-section (7)."
This Sub-section is a new proposal. In the case of appeal against an Income Tax assessment I think I am right in saying that for similar taxation the tax is not levied during appeal. This is an entirely new provision, that the original assessment is to stand notwithstanding the appeal unless the Commissioners direct to the contrary. That power should not be in the hands of the Commissioners. We should not be mulcted in too high an assessment and have to make too high a payment, although we are exercising the right we have under this Bill. We should be able to appeal against a too high, or what we may consider an unjust assessment. I believe the analogy is taken from War legislation. I understand that in the Excess Profits Duty, which was War legislation, there was a similar provision. The Government then was in very urgent need of money under the stress of War, and there may have been justification. This and many other things were necessary owing to the stress of War emergency. We are now legislating for peace measures, although they may be applied to War purposes, and
there is no excuse for these measures. This Sub-section is no longer required. It may impose very great hardship in, cases where appeals are pending. It is a new tax. There is no interest allowed and the money is taken. The appeal may be held up, and the Government has no great interest in getting the appeal settled, and a considerable sum of interest may accrue from year to year which is not repayable. The taxpayer has to find this money and finance the Government, though he may have been inequitably charged.

Mr. CHAMBERLAIN: I am ready to accept the Amendment, It follows the analogy of the Excess Profits Duty, as my hon. Friend said, and it was put in in order to prevent people delaying the payment or satisfaction of these obligations by frivolous appeals or appeals on quite subsidiary grounds. I am ready to omit the Sub-section. Of course, if such an abuse arises, Parliament would have to take action.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Motion made, and Question "That the Chairman do report progress and ask leave to sit again," put, and agreed to.—[Mr. Chamberlain.]

Committee report Progress; to sit again To-morrow.

The remaining Orders were then read and postponed.

It being after half-past Eleven of the clock upon Tuesday evening, Mr. Deputy-Speaker adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at Thirteen minutes before Two o'clock a.m.